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Negative effects of US taxation

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Author Info

  • Javier Portillo
  • Walter E. Block
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    Abstract

    Purpose – The purpose of this paper is to criticize the current US tax system and explain in what ways taxation harms the economy. Taxes are coercive. Taxpayers are forced to pay individual income taxes. If the taxpayer refuses, several adverse consequences will unfold against him even including jail-time. Taxes diminish taxpayer's disposable income and leave consumer's wants unattended. The money they could have used to fulfil their wants goes instead to the government in the form of taxes. Design/methodology/approach – Taxation is analyzed from an economic point of view. Findings – Progressive taxation is harmful to the economy because it punishes successful individuals. The more they earn (a reflection of the productive value they bring to the market), the more they have to pay. Meanwhile less productive citizens paying little or no tax are receiving “benefits” derived from the investment of more successful taxpayers. These are inefficient since they reduce incentives. Taking money from Peter and giving it to Paul decreases the incentive, both have to earn an income and be productive. Finally, the paper exposes the influence government has over taxpayer's decisions. Originality/value – We live at a time in the US when President Obama is calling for greater taxation for the rich, and the Republicans are rejecting this initiative on the ground that it is “class war.” A study of taxation at this point cannot help but shed light on this controversy. JEL classification: H0, H1, H2

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Studies in Economics and Finance.

    Volume (Year): 29 (2012)
    Issue (Month): 2 (June)
    Pages: 76-88

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    Handle: RePEc:eme:sefpps:v:29:y:2012:i:2:p:76-88

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    Related research

    Keywords: Incentives; Inefficiency; Taxation; Theft; United States of America;

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    References

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    1. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
    2. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
    3. Feldstein, Martin S, 1978. "The Welfare Cost of Capital Income Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S29-51, April.
    4. Browning, Edgar K, 1981. "A Theory of Paternalistic In-Kind Transfers," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 579-97, October.
    5. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
    6. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    7. Feldstein, Martin, 1973. "On the optimal progressivity of the income tax," Journal of Public Economics, Elsevier, vol. 2(4), pages 357-376.
    8. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
    9. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
    10. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
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