In 1954, Frank Chodorov wrote the classic book of freedom, “The Income Tax: Root of all Evil.” Here’s an excerpt:
THE SUBTITLE of this book is “Root of All Evil.”
If there is an “evil” there must be a “good”-for the one is the opposite of the other. Hence, we must define “good” in order to establish the fact that an “evil” exists or threatens. It is not necessary to prove that the “good” is really good for all peoples at all times and under all circumstances-in short, that it is made in Heaven. Something can be said for that thesis, but this book-which deals with the income tax and its effects on our social, economic, and political life-is not concerned with it. For the purpose of this book, it is only necessary that we agree on a definition of “good” so that we can recognize its opposite.
You can read the entire book online for free at the Mises Institute – click here
I agree, to a large extent, the income tax is a root of evil. Not so much in concept as application. The ideal tax would put as few roadblocks in the way of a person's ability to garner some wealth. An income tax is an impediment to that. A wealth tax would not be, provided there were in place proper exemptions.
A flat income tax is suggested by many, and I have pondered it long and hard. It would not work. It has a regressive effect to the extent disposable income (which is what we need to save for retirement) is the focus on how taxes affect people. If you apply a flat tax on a person who makes $60k (assuming a disposable income of $5k), that is a harsh tax, compared to the flat tax on someone with $1 million in total income, with a congruent disposable income of $945k. Let's assume a flat rate of 15%. In essence, the former person pays $9,000 in tax – or 180% on his disposable income. The latter person pays $150,000, which is 15.88% of disposable income.
As to a consumption tax, the same problem tends to occur. It will only work out fair across the board if you operate on the assumption that, like the poor and middle class, the wealthy spend virtually all – if not all – of their income consuming. They don't, however. So, they save 80% of their income, instead of consuming it, and effectively shelter their income. The rest, however, pay tax on all – or almost all – their income because they have little choice. They have to eat, and spend almost all their income on mundane necessities, like gas, utilities, cars, furniture, etc.
If we want to have a system that stands out of the way as much as possible of people trying to save for retirement or investment, we need a wealth tax to take the place of any tax based on income. A sales tax is indirectly based on income, to the extent it applies to people who largely have to rely on their income (as opposed to trusts, dividends, interest, etc.) to make their livings.
Nobody likes taxes. So, no matter which way you go with taxes, somebody will always not like it. But the least pernicious would be a wealth tax.