Income Tax and Its Fairness
28 Feb. 2018
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A critique of imported tax debates, arguing that VAT may better support equality and productivity in rentier economies seeking sustainability.
We are often drawn to dubbing economic reforms from the West — simple dubbing adjusted to limited local conditions. This attraction is nothing but a pitiful sign of our inability to devise reforms more suited to rentier, or semi-rentier, states seeking economic sustainability. Such dubbing has only produced prolonged debate over whether income tax is more just than value-added tax, a debate that has failed — or perhaps deliberately refused — to recognize that value-added tax is more equal than income tax.

Let us set those concepts aside for a moment and ask: is taxation, according to economic logic, truly a deduction imposed in return for benefiting from and consuming a state’s resources? Or is it a deduction from part of what a person creates as an addition to gross domestic product? Should it be a sharing of increased productivity? Or a fee for the use of resources? What if there are three factories consuming the same natural and human resources, while one of them achieves a significantly higher profit than the others? Is it economically logical to impose a higher tax on its income? What if that factory contributes more than the others to increasing the state’s exports or reducing its imports? Does the same contradictory logic still stand? This would not merely be a sharing of increased production, but a sharing in the superior intelligence that succeeded in using the state’s resources more effectively to generate a higher return for its gross domestic product — as though the state rewards such minds by increasing what they owe it whenever their creativity rises. According to economic logic, where is sustainability in that?

If theorizing that income tax is more useful than value-added tax appeals to low- and middle-income groups because, in their view, it better achieves justice — since their needs are equal to those of higher-income groups, which supposedly requires inequality in value-added tax but differentiation in income-tax rates — then why do we not also consider the argument that value-added tax is more equal than income tax, since people across all categories each bear a tax on what they consume of the state’s resources? Where, then, does the true merit lie? In justice, or in equality?

Justice has become known and deeply rooted in the culture of the rentier society, and there is no doubt that the matter is somewhat relative. Yet the question remains: if the objective is to move from rentierism toward sustainability in order to preserve continuity now under threat, may we prefer justice over equality in pivotal matters closely tied to incentivizing a segment capable of moving toward productivity? Or should we pause somewhat — thereby affecting the guarantee of that continuity — in order to support another segment that is not capable of moving toward such productivity? The state must care for those unable to become productive, yes. But where will the state be tomorrow if it devotes itself to caring for them today?

Abdullah Al-Salloum
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Answers
How can rentier culture move from a general idea to something measurable?
Rentier culture links gains to the state more than to production, making reform look like a threat rather than a necessary transition. When accountability is ignored, the idea becomes a limited procedure that does not change the wider path.
How can public debate move from a general idea to something measurable?
Debate supports reform when it seeks evidence and results; it obstructs reform when it becomes accusation, denial, or short-term gain. When accountability is ignored, the idea becomes a limited procedure that does not change the wider path.
How can living standards and productivity move from a general idea to something measurable?
Living standards cannot remain stable without real productivity, because welfare funded externally or by a depleting resource remains vulnerable. When accountability is ignored, the idea becomes a limited procedure that does not change the wider path.
How does income tax, VAT, and fairness in rentier economies affect the economy?
Its effect appears in how costs, incentives, and resources are managed, and in the economy's ability to turn decisions into sustainable value. The direct context is imported tax debates, arguing that VAT may better support equality and productivity in rentier economies seeking sustainability.
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