Historically, taxes have been viewed as a “necessary evil” in order to fund government. They have been difficult to collect, have exacerbated inequalities in society, and encouraged a host of illegal activities. In modern times, personal income taxes are particularly egregious, as they directly reduce an individual’s income that was earned through direct labor. PROUT suggest the elimination of income taxes and replaces it with a production tax levied at the point of production. Producers of goods or services would pay a tax before their production is purchased by the consumer. Although PROUT’s decentralization policy would greatly reduce the need for importation, all imported goods would be subject to an import tax to be paid by the importer before it became available to consumers.
The production tax would be levied progressively, so that essential commodities are taxed less than non-essential goods. In this way, those who choose to spend more of their incomes on non-essential items would pay higher prices due to higher tax rates. PROUT’s system of taxation would be far simpler to maintain, make tax collection more efficient, reduce tax evasion, and place more tax burden on those willing to pay more for luxury goods and services.