ABSTRACT
The basic justification for the progressive personal income tax is probably the socio-economic objective of reducing great disparities of welfare, opportunity and economic power arising from the unequal distribution of income. Although personal income taxation has a long history, some of its major features still present numerous unresolved problems. The personal income tax raises substantial amounts of revenue in all industrialised countries of the free world and is employed, although to a lesser extent, in most underdeveloped countries. Three major aspects of the personal income tax may be distinguished in appraising its economic effects; first, its automatic response to changes in total personal income; second, its effects on the allocation of personal income between consumption and saving; and third, its impact on work and investment incentives. A personal income tax applies to the income of an individual regardless of the allocation of this income between consumption and saving.
