The government, in the above example, may still want tax revenue for the net income, even if the farmer builds the table himself. But imputed income is difficult to identify and very difficult to tax. Hence, the farmer—and any person or business with the requisite internal resources—could avoid or evade income or sales taxation associated with imputed income, and thus shift liability for the cost of government to others who engage—or have to engage—in interpersonal or inter-business trade. Smaller businesses, which are highly adaptable but have fewer internal resources than larger businesses, may be disproportionately impacted from imputed income activity under an income or sales tax.
All taxes can impact trade and sales prices, but sales and income taxes are perpetual (continue to occur even when revenue requirements have been met) and can, especially at higher tax rates, discourage trade and economic efficiency usually associated with the division of labor.
Income Imputation and the Analysis of Consumer Expenditure Data: The Consumer Expenditure Survey Now Provides Imputed Income Data from 2004 Forward for Households That Do Not Report a Specific Income Value; an Examination of How Income Imputation Affects the Analysis of Expenditure Data Shows That the Results Most Sensitive to Imputation Are Statistics That Focus on Households with Lower Levels of Expenditures
Nov 01, 2006; The Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CE) began imputing income in its 2004 data. Imputation predicts...