John Maynard Keynes was an influential British economist of the 20th century and one of the most illustrious contributors towards the development of modern economic analysis and policy. Throughout his life, he used theoretical models and principles to propose solutions to pressing social, political, and economic issues. One of his most praised proposals was his taxation system.
In 1936, Keynes published his influential book, The General Theory of Employment, Interest, and Money, in which he proposed a unified and coherent theory of how the capitalist economy works. In this book, he proposed his taxation system, which relies on progressive taxation, which he argued could lead to more equitable distributions of wealth and incomes.
In Keynes taxation system, the basic idea behind progressive taxation is that individuals with higher incomes should pay higher proportions of their income in taxes. Thus, maximum rates of taxation increase with income. The basic form of the rate schedule is a linear or bracket system in which tax rates become higher as income increases.
Given Keynes view that progressive taxation is the only equitable way of avoiding what he called economic tyranny”, he proposed that the government should tax individuals in proportion to their earnings. In other words, individuals with higher incomes should be taxed more, while those with lower incomes should pay fewer taxes.
Keynes also argued that progressive taxation was necessary to make sure the wealthy paid their share of taxes. He argued that if the wealthy were allowed to pay lower taxes, the burden of taxes would be pushed onto the lower classes, leading to an increase in inequality. He proposed that the government should impose tax rates that were lower for low-income earners and would gradually increase until they reached maximum rates for high earners.
Keynes viewed taxes as functional means of redistributing wealth. He argued that inadequate taxation of the wealthy led to an increase in inequality, while taxation targeted at high-income earners would reduce inequality, as the wealthy would be paying more in taxes, while the burden of taxation would be shifted away from lower classes. He further argued that taxation is necessary to fund public welfare programs, which can sometimes provide assistance to those who are suffering from poverty, unemployment, and other issues.
The General Theory of Employment, Interest, and Money is widely considered as Keynes magnum opus, which includes his approach to taxation. His proposals of progressive taxation has been adopted by many governments around the world and is still seen as an effective way of mitigating inequality by redistributing wealth. Although some aspects of Keynes economics have been challenged in recent years, his taxation system continues to provide a robust framework for the establishment of equitable taxation policies.
