Meditations and Learnings

Meditations and Learnings

Who Bears the Tax Burden?

It is onerous to estimate tax revenue from individuals and organisations, partly because the tax burden is not easy to discern. Low-income workers can’t afford the lawyers and accountants to configure complex financial arrangements and avoid tax. Proportionally, they consume more consumer goods than higher-income workers and are hit harder by sales tax. Some people who have reached their peak earning years are not considered “rich” but are wealthy by no other measure.
The truly wealthy, as aforementioned, can hire the right people to pay as little tax as possible. More of their money is invested, reducing their exposure to sales tax. The richest can live without any income, avoiding any income tax.

Taxes levied on enterprises can be passed onto employees via lower wages or the customers via higher prices. When a business hires an employee, it is not out of charity - the employee is supposedly worth at least as much as they earn. If an employee contributes £50,000 to the company’s gross profit and has a salary of £45,000, additional costs can render the employee not worth their wages. A Social Security tax combined with other costs could easily exceed £5000.

Inflation and progressive taxation laws mean rising taxes for a given real income. Conversely, a period of deflation has the effect of falling tax rates on a given real income. Inflation and capital gains taxes deter investment which harms general economies activity and decreases job opportunities. Those without a job because of tax laws will usually never understand this is behind their unemployment.