Taxation is crucial to the functioning of the modern state. Tax revenues
pay for public services - roads, the courts, defence, welfare assistance
to the poor and elderly, and in many countries much of health care and
education too. More than one third of national income in the
industrialized (OECD) countries is on average taken in taxation. Taxes
affect individuals in many ways. Taxes paid on income and spending
directly reduce taxpayer disposable income, taxpayers face the hassle of
tax returns and making payments, and they may be anxious about the
possibility of investigation and enforcement action. People also adapt
their activities in various ways to reduce the impact of taxation -
putting money into tax-free savings accounts, or making shopping trips
to other countries where taxes are lower.
Taxation is therefore central to politics and public debate. Politicians
that make reckless campaign promises about taxation then have to live
with the uncomfortable consequences if elected. Businesses lobby for tax
breaks that they claim will create jobs and prosperity.
In this Very Short Introduction Stephen Smith shows how taxes have
real effects on citizens and the economy that tax policy-makers have to
balance. Although tax policy will always be a highly political issue, he
argues that public decisions about taxation would be improved by a
better understanding of the role of taxation, and of the nature and
effects of different taxes.
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