Taxation Research Paper

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Taxation is as old as recorded history. The earliest forms of writing, pictographs from the ancient Near East, are records of taxpayer accounts, paid and owed, to the king. Taxation is the taking of economic resources by a political entity from an individual or collective who is subject to its authority. It is a taking in that taxation is not a freely voluntary exchange, because resources are given under threat of coercion. Economic resources can take the form of money, goods, or service. Political entity refers to an individual (chief, prince), group (tribe, caste), or institution (state, government) that makes claims on and decisions for those from whom economic resources are sought. Their authority to claim economic resources is derived by consent, law, or force. The subjects of taxation are usually territorial based, including social collectives (tribes, villages, colonies, castes), economic collectives (guilds, mercantile companies, incorporated businesses), and individuals and households.

There are two general forms of taxation, direct and indirect. Direct taxation refers to tax claims made on fixed entities, such as a person, a business, land, and property. Indirect taxation refers to tax claims made on economic transactions, such as the sale of goods and services, trade, and commerce. For much of preindustrial history, taxes were direct, such as the poll tax. They were imposed on collectives and paid in kind with service (labor) or goods (a percentage of agricultural harvests). With the rise of capitalist cash economies in the modern period, taxation increasingly was directed toward money and financial assets. The modern state has shown a preference and capacity for indirect taxes as well as direct taxes claimed from individual households and business collectives.

Taxation is a type of exchange relationship between a political entity and its claimed subjects. Exchange is what distinguishes taxation from plunder. The political entity is supposed to provide something in exchange for economic resources. In the earliest forms of taxation, political entities claimed tribute in exchange for protection from physical harm, both from the political entity itself and from others in warfare or robbery. As the relationship evolved historically, taxation became more varied in form and routinized in collection; in exchange, political entities provided more public goods, such as dispensation of justice, enforcement of law and property rights, establishment of economic infrastructure and cultural institutions, and provision of social and economic welfare goods. Some taxes are imposed not just to raise revenue but also to promote or discourage social behavior. For example, a reduced tax burden is meant to encourage charitable donations, while higher tax rates are meant to discourage smoking and drinking.

Taxation serves as the arena where power and wealth collide and connive in society. Each society develops its own system of distribution of tax burdens, progressive or regressive, which inevitably penalizes some and benefits others. Quasi-voluntary compliance occurs when political authorities succeed in providing sufficient goods in exchange and maintain a perception of fairness in the tax burden and a threat of coercion against those who do not pay. If these three factors are not in place, the tendency for evasion and noncompliance increases. Also income tax compliance was enhanced when employers were made to share responsibility for payment with employees. Tax burdens are sometimes effectively hidden in the final costs of goods. Resistance to the revenue claims of political authorities in the form of tax revolts provides some of history’s most notable political conflicts, including the English civil war, the French Revolution, and the American War of Independence.


  1. Adams, Charles. 1993. For Good and Evil: The Impact of Taxes on the Course of Civilization. London and New York: Madison Books.
  2. Burg, David. 2004. A World History of Tax Rebellions: An Encyclopedia of Tax Rebels, Revolts, and Riots from Antiquity to the Present. New York: Routledge.
  3. Webber, Carolyn, and Aaron Wildavsky. 1986. A History of Taxation and Expenditure in the Western World. New York: Simon and Schuster.

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