Abstract
Income taxes are the single most important source of revenue for most countries, although there is an active debate about the relative attractiveness of alternatives such as broad-based consumption taxes. In practice, the income tax base deviates from a comprehensive income measure in several important respects, by excluding non-market activities, limiting refunds for losses, and including capital gains on realization rather than on accrual. Each deviation introduces additional distortions of taxpayer behaviour. Defining the family unit for purposes of income taxation remains a complex issue, as does the optimal degree of tax progressivity.
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Auerbach, A.J. (2018). Taxation of Income. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1554
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1554
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