Sunday, October 24, 2010

The IRS as Philosopher

Another look at yesterday's excerpt from the IRS:

This argument asserts that wages, tips, and other compensation received for personal services are not income, because there is allegedly no taxable gain when a person “exchanges” labor for money. Under this theory, wages are not taxable income because people have basis in their labor equal to the fair market value of the wages they receive; thus, there is no gain to be taxed.

The IRS asserts that there is "gain" when a person exchanges labor for money.

I would agree with the IRS. ("Let the wookie win.")

But I do want to point out the argument used by the IRS to justify taxing wages: that wages are "gain," and "gain" is taxed.

There is a rule of thumb that says: Every tax is a dis-incentive. Taxing "gain" is a dis-incentive to do gainful things.

There are a lot of philosophical problems like that in our tax code.

No comments: