As talked about above, taxation primarily based on income alone tends to discriminate towards individuals who haven’t but amassed wealth. In follow, the earnings tax by no means reaches capital gains until they’re realized; even when realized, the positive aspects normally receive favorable therapy relative to different revenue. It also taxes extra heavily the holders of high-yield securities and risky investments, thereby favoring holders of low-yield and no-yield investments, who take pleasure in larger safety and can also benefit from liquidity. Some of those fairness issues could be met under an revenue tax by inserting a heavier burden on property revenue, by together with imputed rental value of properties and capital gains in taxable income, and by closing other legislative loopholes. However, these income tax approaches encounter numerous administrative issues.
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