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Why Income Tax Hurt Income Earners And Workers

By Jim Thio

All wealth redistribution comes in the form of the equivalent of tax and welfare. However, you need to be careful. Incorrect taxation schemes can result in less wealth for you. You see, by reading this website I would suppose that you’re poor or middle class wanting to skyrocket your income, right. Rich means owning a lot of money. If you’re poor and would want to get rich, you need to have a lot of income. So will income tax help? No! Abolish income tax.

The Peril of Income Tax

Income tax can exaggerate wealth difference and can cause great deviation from meritocracy. Income tax can be very unfair and bad for workers.

Think of it this way. Imagine a country where you live. Say your friend Bob has an employee Ann. Bob is a rich man because he owns a lot of farm land that he uses as his recreational facility. Ann works for Bob as a farm labor. You work by productively serving the market through various means.

Bob earns his land through inheritance from his ancestors. His ancestors earn the land by massacring Indians and seizing their land. Not exactly productive means of acquiring wealth, however for all legal purposes, Bob’s land is his.

The market tends to reduce the effects of injustice. A stupid lazy person owning great wealth will lose it in gambling table while the smart and diligent worker will have plenty of capital owners willing to lend money to him. So I am not going to argue much over 300 years old injustice.

It’s simply a natural order that the more capable gets more money and it does take skill to commit genocide I must admit. Moreover, people often earn large amount of money unproductively due to society's failure to embrace meritocracy. If the rule says you got to bribe or be a dictator to get rich, can we blame people to do just that? So in a certain very twisted sense, it’s fair.

Nevertheless, I look much more kindly on capitalistic wealth earned recently through merit within ones’ own lifetime rather than wealth earned through inheritance. The latter is rather dubious.

Now, what would income tax do with this injustice? Income tax will exaggerate it. You, as workers who serve the will of the market will have to pay income tax. The money goes to pay subsidy for farm products. Politicians will say that it benefits Ann. Will it? No. Ann is a farm laborer. The market value of any labor is constant across industry. If Ann gets paid with less money as farm labor, Ann will move job to a service industry.

So the subsidy does not profit Ann. Then who profits? Bob… You see how a combination of income tax and governments’ controlled subsidy take money from you, the still poor workers, and give the money away to rich land owning people?

The perils of income tax go on and on. You make money honestly. Your friend is lazy. Say you’re both poor. Who pays more tax? You. That’s because you have more income. The pretext is to take money from the rich and give it to the poor. Yet, even though you’re both poor and start of with the same amount of money, you pay more tax. That punishes diligence and productivity.

Say Bob and you are equally rich. Bob builds mansions. You build factories. Who pays more tax? You… Why? That’s because factories produce income. Factories also create jobs. So, income tax reduces incentives to use wealth for productive means.

Increase of Fearsome Governments Power

Income taxes give governments far more power than what’s originally intended. In US, for example, governments do not have power to know your financial transaction. Yet governments can take your money through tax and then demand that you voluntarily report your financial transactions to get tax returns.

Federal governments do not have the power to regulate some aspects of the states. Yet federal governments can tax everyone and deny funding for states that do not observe federal speed limit. Federal governments do not have direct power to indoctrinate your kids, however, the governments can tax everyone and subsidies public school. The list can go on and on. With income tax, everyone is a slave.

If income tax is such a bad idea, how should we replace that then?

Non Productive Means to Acquire Wealth

There are two types of wealthy people. Self made millionaires, and the rest. Self made millionaires are highly capable, diligent, and ambitious individuals. That is you or what you’ll become. To be rich, such self made millionaires need to have a lot of income. Taxing income hurts self made millionaires. Not only that, we’re talking about highly diligent and capable people here. Those people don’t go down easily. When income is taxed, they’ll resort to other ways to create wealth. That ranges from hiring lawyers to avoid tax, fighting governments, corruptions, or becoming a dictator.

Just look at Saddam. Why do you think he chose to be a dictator? Why Kim Yong Il became a dictator? Are those people too stupid to earn wealth productively? No. They’re smart. But they chose to be a dictator because productive means of creating wealth are harassed by various regulations like income tax.

Supporting income tax or any consensual means of making money will not only hurt you, but also hurt all poor and middle class. Just look at the median wealth of capitalistic countries and socialistic countries and you’ll see my point easily.

If you really want wealth redistribution, don't tax income, tax wealth.

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Jim Thio is a silver medalist in International Physics Olympiad. He uses his Math skills to provide free financial, business, and marketing advices in