An income tax is a tax
levied on individuals in proportion to their income
. (There is such a thing as a corporate income tax
, but the generic "income tax" usually refers to personal income taxes.) Of course, what is considered "income"
(and not, say, capital gains
), and how income is calculated may vary, depending on who is doing the taxing. Income taxes are most often levied at the national level, although some states, prefectures, and similar administrative units have their own taxes. Most of the world's leading countries rely on an income tax as a primary source of funds. This tax on wealth highlights the centrality of fluid capital
in their advanced industrial
economies, in comparison to the property taxes
and import and export duties
suited to agricultural and resource extraction economies, where land and trade (respectively) are of primary importance.
Many modern income taxes are progressive, meaning that as a taxpayer's income grows, progressively higher marginal tax rates are applied to determine the amount of taxes to be levied. (While widespread, progressive taxes are neither universally employed nor universally accepted, a matter for another node) For example, using thbz's numbers, a single American with an income of $80,000 would pay
($27,050 * .15 + $38,500 * .28 + $14,450 * .31), or $19,317 before deductions.
Between the varying definitions and treatment of income, the desire to maintain progressivity, all the various exemptions, special cases, and deductions instituted to achieve some economic or political goal, and the imperative to apply them to many millions of people of wildly varying financial situations, income tax codes are incredibly complicated. This leads to the major (non-ideological) problems with income tax codes: first, the average taxpayer (or even, for that matter, a dedicated professional tax preparer) has no chance whatsoever of understanding the tax code in its entirety, and even if she limits herself to that portion of it directly necessary to the filing of her taxes, she will likely have significant difficulty understanding it. Individuals with extensive holdings, multiple sources of income, or who are subject to some of the "special cases" are virtually obligated to hire financial advisors and/or accountants to prepare and file their taxes. This brings us to the second major issue, which is that the particularly rich, with the benefit of professional assistance, are often able to manipulate their finances so as to take advantage of the obscure deductions, exemptions, and conditions of the tax code, significantly reducing their tax assessment. (This is not strictly a matter of income tax, as much of this shades into capital gains and various other investment taxes.) Civic duty aside, if you could pay someone $100,000 to save you millions, you probably would too. Finally, if legal "evasion" wasn't a big enough issue, this complexity, combined with the sheer number of taxpayers and the fact that modern tax authority is usually centralized, means that governments must often rely on taxpayers to accurately calculate, report, and pay their income taxes, which practically ensures both innocent miscalculation and intentional underreporting. Semirandom audits can reduce, but not eliminate, these problems.
Between these problems and the fact that people just don't like taxes, any government levying them will find them a major political issue, with calls to alter or reform the system (if not eliminate it altogether) cropping up regularly every election year.