Everyone knows that taxation is necessary in a modern state. Without it, it would not be possible to pay the soldiers and policemen who protect us, nor the workers in government offices who look after our health, our food, our water, and all the other things that we cannot do for ourselves, nor also the ministers and members of parliament who govern the country for us. By means of taxation, we pay for things that we need just as much as we need somewhere to live and something to eat.
But though everyone knows that taxation is necessary, different people have different ideas how taxation should be arranged. Should each person have to pay a certain amount of money to the government each year? Or should there be a tax on goods that people buy and sell? If the first kind of taxation is used, should everyone pay the same tax, whether he is rich or poor? If the second kind of tax is preferred, should everything be taxed equally?
In most countries, there is a direct tax on persons, which is called income tax.
It is arranged in such a way that the poorest people pay nothing, and the percentage of tax grows greater as the taxpayer’s income grows. In England, for example, the tax on the richest people goes up as high as ninety-five per cent.
But countries with direct taxation nearly always have indirect taxation too. Many things imported into the country have to pay taxes or “duties”. Of course, it is men and women who buy these imported things in the shops really have to pay the duties, in the form of higher prices. In some countries, too, there is a tax on things sold in the shops. If the most necessary things are taxed, a lot of money is collected but the poor people suffer most. If unnecessary things like jewels and fur coats are taxed, less money is obtained, but the tax is fairer, as the rich pay it.
Probably this last kind of indirect tax, together with a direct tax on incomes which is low for the poor and high for the rich, is the best arrangement.
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