The Income Tax Paradox (John Cochrane, December 6, 2023, The Grumpy Economist)
So why does the government tax income? Because, circa 1913, income was easier to measure than sales, value added, consumption, or other economically better concepts. When money changes hands, it’s relatively for the government to see what’s there and take a share. Tariffs really start from the same concept. It’s relatively easy to see what’s going through the port and demand a share, Adam Smith, David Ricardo and free trade be damned. But the government wanted more money than tariffs could provide.