ABSTRACT
The concept of income for tax purposes has a long history which is inseparably intertwined with that of the income tax. An extensive and far reaching debate on the appropriate concept of income for tax purposes took place in Germany long before income taxes were introduced in North America. This chapter identifies the major income tax reform debates in Canada and the US and the underlying rationale used in each case in support of a comprehensive income tax. The concept of a comprehensive income base is often associated with the name of Henry Simons, not because he was the first economist to suggest it, but because he was the first one to develop it fully. Simons argues that the two concepts are very different and serve different purposes. The primacy assigned by Simons to liberty springs from his acceptance of the concept of a good society associated with classical liberalism.
