©Michele Monticello Essay  all photos ©Michele Monticello  

What Is a Tax System Really Trying to Tax? At first glance, the answer appears obvious. Governments need revenue to fund public services, infrastructure and the institutions on which society depends. But this explains why taxes exist, not what they are fundamentally intended to tax.

Should taxation fall primarily on what we earn, what we spend, what we own, or our overall ability to contribute? The answer matters because every tax system reflects a philosophy. It rewards certain behaviours, discourages others and quietly shapes the choices people make throughout their lives.

When someone earns an income, they first contribute through income tax and national insurance. They can then choose how to use what remains. They might spend it on holidays, restaurants, clothes, cars or entertainment. Once that money has been spent, it has largely disappeared into the economy. The transaction is complete.

Alternatively, they may choose to buy a property. Unlike a holiday or a meal, a property is not consumed. It becomes a long term asset that provides security, shelter and, in many cases, accommodation for others. Yet this decision often attracts layer upon layer of taxation. There is tax when the property is purchased, annual taxation while it is owned, taxation on income if it is rented, potential taxation on any gain when it is sold and, in some circumstances, taxation again when it is passed to the next generation.

This raises an important philosophical question. Why does ownership appear to attract repeated taxation while consumption generally does not?