ABSTRACT
The US individual income tax has been eroded by numerous special provisions which remove large chunks from the tax base and reduce the revenue potential of any set of tax rates. To determine the extent of erosion of the income tax, a comprehensive definition of income must be adopted to provide the norm against which the existing tax can be assessed. This chapter utilizes a concept which corresponds as closely as possible to an economic concept of income, that is, consumption plus tax payments plus the net increase in the value of assets during the year. The modifications to this definition are dictated largely by practical administrative considerations or by historical precedents which need not be broken for this purpose. The chapter outlines the rationale for the major revisions which are incorporated in the comprehensive income tax.
