I remember in law school my income tax professor recommended a book for those of us who wanted a more tax nerd approach. I can't seem to find my copy right now, so I may be getting some details wrong as the following is from 30 year old memories.
Anyway, there was some discussion in the book of what would be the ideal tax in terms of fairness, effectiveness, minimizing market distortion, and assorted other you want in a good tax if we did not have the constraint of it actually being practical to implement.
I think that the conclusion was that a tax on changes to net wealth was the best. Each tax period, subtract your net wealth at the start from your net wealth at the end, and that difference is what you are taxes on. (Whether it should be a flat rate or depend on on the size of the difference is a separate question). If that's positive, you owe tax. If that's negative, you get a refund.
Unfortunately, it is not practical because wealth (1) is often heard to determine, and (2) is often in forms that can be efficiently converted to cash or cash equivalents to actually pay taxes with.
Income taxes kind of approximate this for the large number of people that do not have a significant amount of money in real estate or in personal property (other than investments such as mutual funds). For them, most of additions to wealth come from income, and the standard deduction kind of approximates subtractions from wealth, leaving taxable include roughly matching net change in wealth.
Anyway, there was some discussion in the book of what would be the ideal tax in terms of fairness, effectiveness, minimizing market distortion, and assorted other you want in a good tax if we did not have the constraint of it actually being practical to implement.
I think that the conclusion was that a tax on changes to net wealth was the best. Each tax period, subtract your net wealth at the start from your net wealth at the end, and that difference is what you are taxes on. (Whether it should be a flat rate or depend on on the size of the difference is a separate question). If that's positive, you owe tax. If that's negative, you get a refund.
Unfortunately, it is not practical because wealth (1) is often heard to determine, and (2) is often in forms that can be efficiently converted to cash or cash equivalents to actually pay taxes with.
Income taxes kind of approximate this for the large number of people that do not have a significant amount of money in real estate or in personal property (other than investments such as mutual funds). For them, most of additions to wealth come from income, and the standard deduction kind of approximates subtractions from wealth, leaving taxable include roughly matching net change in wealth.