Although tax revenues are often significantly different from each other, their assessment and comparison can be made using specific criteria. This paper aims to compare income tax and property tax and analyze their fairness and the equity of taxes in the system as a whole. The first factor is equity, divided into horizontal and vertical, and consists of the distribution of accumulated funds. In this context, property tax is much more profitable, according to experts, since income tax has a substantial horizontal inequity (Mikesell, 2018). The adequacy question is quite simple, and it is whether the taxation system will generate sufficient income or whether the use of services will be a burden on future generations. In this case, both taxes are approximately equal since they provide roughly the same outcomes and forecasts.
However, income tax is much more expensive in terms of collectability because property taxes can be collected at a much more leisurely pace. Although also challenging to understand, the latter tax is undoubtedly more transparent (Mikesell, 2018). Finally, given that property tax is the primary source of revenue for the government, it is much more cost-effective than income tax. This is also supported by current economic models, such as the Chinese economy, which introduced a property tax to generate permanent income (Liu, 2020). Thus, it can be concluded that the property levy is much more fair and equal than the second option under consideration.
Much more transparency speaks in favor of this conclusion, allowing people to understand precisely where their money goes. Besides, transparency enables people to handle the tax system more conveniently, eliminating unnecessary problems with filling out paperwork.
While the government may appear to benefit directly from unfair taxes, honesty and the need to generate income coexist. There are several reasons why the government is trying to be more honest with the charges. First, it is necessary to comply with the law, so it is impossible to make an utterly unfair tax. When changing the legal system for additional profit, the state risks getting increased citizens’ discontent, which will grow with decreasing justice. Second, studies show that more honest, fair, and understandable taxes are much better enforced by citizens (Farrar et al., 2020). Therefore, the government directly benefits in creating a more equitable system, even if the theoretical income per person is less.
References
Farrar, J., Massey, D. W., Osecki, E., & Thorne, L. (2020). Tax fairness: Conceptual foundations and empirical measurement. Journal of Business Ethics, 162(3), 487-503. Web.
Liu, Z. (2020). Land-based finance and property tax in China. Area Development and Policy, 4(4), 367-381. Web.
Mikesell, J. L. (2018). Fiscal administration: Analysis and applications for the public sector (10th ed.). Cengage Learning.