Individual Income Taxation

Abstract

Abstract Income taxation is the cornerstone of the authors’ approach to longer-term reform. Therefore, it is important to examine how income is derived both methodologically and practically. The specific practical structure proposed in this chapter is based on the use of Advance Payment Agents, described in Chapter 2, to collect tax on the components of income as they accrue. The extent to which taxable income is aggregated into an empirical measure of comprehensive income with the advanced payments used as a credit will depend on administrative capacity and public awareness. A practical standard for income taxation is described in this chapter. The standard is an empirical measure of income from market interactions based on one derivation of Haig-Simons Income. The standard is an objective to be achieved through time. Knowledge of the standard is necessary, however, in order to implement piecemeal policy consistent with the longer term goal. One strategy for emerging economies is described.