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Tax and Taxes in History
by Contalisa Davodo
http://www.fsctax.com
A tax system is present in most modern societies. The
concept of tax is not a recent one, although modern tax
systems have changed markedly from earlier ones. However,
knowing a bit about the ideology behind modern tax systems
may make us feel less reluctant when we give our share back
to the government.
Most older societies had some kind of tax - people paid
their rulers in exchange for protection. This is one of the
basics of taxation - you pay tax in return for protection
and services. In pre-industrial societies Kings (for
example) would collect taxes in the form of labor or
troops, rather than money.
Money is the modern medium for tax, though the ideas have
remained fairly clear since the Scot Adam Smith wrote down
his tax ideas (Smith was a moral philosopher who is most
strongly associated with modern economics).
When Smith was thinking through the concept of taxation he
felt it needed to follow 4 rules. The first was that the
tax should be fair; the second was that the tax payer
should be able to understand it, therefore it should be
clear; the third rule was that payment should be convenient
and that it should be easy to collect and the forth and
last rule was that the money generated to the government
should be more than was incurred in collection.
Although these ideas have been added to in the last two
centuries, they still form the principles of taxation.
Fairness is the principle that is most interesting, because
it is not obvious what it means. Adam Smith was keep that
taxes were payable, and that no member of society was
punished by the tax system. So how can this be done?
There are three basic options for taxes: everyone could pay
exactly the same; everyone could pay the same percentage of
their income; those with bigger incomes pay a bigger
percentage of their income. The last option is a
progressive tax and has been chosen by all modern states.
The richer are still left with more money after tax, and
this is generally felt to be fairer.
Not all agree that progressive tax is fairest, of course.
All governments nowadays believe that if taxes for the
richer members of society are set too high that it will act
as a disincentive for enterprise and hard work.
There are many things that can be taxed - companies,
people, property - and many ways to tax them - Customs
duties, excise duty, personal income tax, sales tax...
Personal income tax - money gather based on earnings - was
first used in the UK in 1799, but took a long while to
catch on - in the US it was only formally adopted in 1913.
Some taxes have led to wars. For example, the stamp duty
that was gathered by the British was one factor behind the
American War of Independence. The vast majority of people
resented paying the tax as they did not feel they were
receiving either the services or the protection that
underlies the payment of taxes. The battle cry for
independence was no more tax without representation.
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