Question

Section 61 indicates that gross income “from whatever source derived” is taxable. Select a type of income that you know to be taxable under Section 61 and prepare a cogent, academic, policy argument for why it should not be taxed. Be sure to incorporate the following elements:

Your cogent, academic, policy argument

How Adam Smith’s elements of taxation are impacted by the decision to not tax the type of income you picked.

Who in society will win or lose based on the change in policy.

At least one unintended consequence of the change in policy.

Answer 1

The income I chose is lncome from proceeds of life insurance.

Life insurance proceeds other than what is paid in form of premium etc is taxable. However it should not be declared as exempt as in many cases the proceeds are the only source of income or saving for the family where their sole earning member dies or become permanent diable. Taxing it makes the proceeds less which is against the society sentiments at times.

It will impact Canon of convenience in positive way as the person paying it may not feel comfertable and vanishing it may help in achieving it.

The most benifitted section of society would be middle and lower middle class families who generally have 1-2 earning member and children to be taken care off.

One unintented consequence would be that it will lead to fall in tax revenues for government.