INCOME TAX, PERSONAL

levy that is imposed on individuals or family units and that is computed on the basis of income received. It is usually classified as a direct tax because the burden is presumably on the individuals who pay it. Before World War II, the personal income tax was usually a class tax in the sense that most wage earners, salaried employees, and self-employed individuals were, in effect, exempted from it. Since that time exemptions have been sharply reduced in economically developed countries. By comparison, in less developed countries the income tax remains a levy on a minority of the population, commonly those employed by the government and in advanced sectors of the economy; for administrative reasons, it is often difficult to extend the tax to the self-employed. As an instrument of national policy, the personal income tax has played different roles in different countries at different times. In Great Britain, where the income tax first made its appearance at the close of the 18th century, it was accepted without enthusiasm as a temporary means of raising badly needed revenue in a war emergency. It was revived in 1842 as a peacetime levy to help finance civil expenditures during a period of tariff reform. By 1914 the personal income tax had come to be regarded in a number of countries not only as an important revenue instrument but also as an instrument for achieving social reform through income redistribution. Finally, in most countries it has been used to redirect economic decisions, through preferential treatment of various activities. It also acts as a stabilizer against economic fluctuations because its effect on purchasing power varies inversely with changes in income and employment. In the late 20th century, however, there was somewhat of a movement away from the view that the income tax should be used for these purposes. Additional reading Henry C. Simons, Personal Income Taxation (1938, reprinted 1980), a classic discussion of the concepts of personal income as a basis for taxation; William Vickrey, Agenda for Progressive Taxation (1947, reprinted 1972), an excellent analysis of many of the problems of income taxation; B.E.V. Sabine, A History of Income Tax (1966), which surveys the policies in Britain and the United Kingdom from 1799 to the middle of the 20th century; Edwin R.A. Seligman, The Income Tax: A Study of the History, Theory, and Practice of Income Taxation at Home and Abroad, 2nd rev. ed. (1914, reprinted 1970), which includes in its coverage the United States and its pre-World War I policies; Richard Goode, The Individual Income Tax, rev. ed. (1976); Joseph A. Pechman (ed.), Comprehensive Income Taxation (1977); David F. Bradford, Untangling the Income Tax (1986); Stanley S. Surrey, Pathways to Tax Reform: The Concept of Tax Expenditures (1973); Walter J. Blum and Harry Kalven, Jr., The Uneasy Case for Progressive Taxation (1953, reprinted with additions, 1978); Henry J. Aaron (ed.), Inflation and the Income Tax (1976); and Stanley S. Surrey and Paul R. McDaniel, Tax Expenditures (1985). Charles E. McLure, Jr.