++Post under construction++
Here is a summary of what we were debating here.
Basically, in a sane world, normal earned income, output or profits would not be taxed at all. But there's no harm, and a lot of benefit to taxing rental income or monopoly/cartel income.
Monopolies and cartels
The traditional view of monopolies is simply to say that if one business controls a large share of a particular market, then the government steps in and prevents it increasing in size, opening new outlets or taking over rivals. The usual example is supermarkets in the UK. This is actually a misuse of the word "monopoly" because what the supermarkets have is a cartel with half a dozen big players and a few minnows. So what the Monopolies and Mergers Commission does if it restricts each business to a market share of x%, it ensures that there are 100/x players in the market, and cartel behavior or collusion is less likely the more players there are.
Some kinds of monopolies/cartels arise solely because of barriers to entry, usually imposed by the government (encouraged by incumbents), which restrict the size of the market, thus enabling incumbents to push up prices without fearing competition. Two examples of this are towns where there is only a limited number of taxi-drivers permits and the mass of regulations imposed on children's nurseries and child-minders. These monopolies can be largely abolished by getting rid of the barriers to entry.
But there are "natural" monopolies where there can only ever be a limited number of providers or where the total market is limited by other forces (natural, economic, legislative, doesn't really matter). If the government wants to claw back the monopoly element of their profits, there is no one-size-fits-all approach, it's a question of divide and conquer.
The main sources of rental or monopoly income:
Rental income from land-location values
An annual tax on the land-location's market rental value. The tax can be anything up to 100% of that rental value without any harm being done, but it could be a lower figure.
This is by far and away the largest potential source of revenue. In the UK, it's only about one-sixth of GDP (£200 - £250 billion per annum) but if taxes on earned income were abolished, it could easily be one-third or one-half.
Road space
In monetary terms, the second largest source of rental income for the government is user-charges for roads (currently about £50 billion per annum). In theory, this can be done by road pricing but that requires a lot of technology.
What most countries do is simply have fuel duty and then VAT on top of that. There are lots of other bits and pieces like the annual car tax; VAT on new cars, parts and repairs; P11D charges on company cars; parking fees and fines; insurance premium tax and so on. It all adds up to about £50 billion a year.
The whole lot could be replaced with a slightly higher fuel duty. This has the advantage over road-pricing in that it is also a tax on pollution and encourages people to build/use more efficient cars, drive more steadily and reduces the cost to occasional motorists. It also acts as a "congestion charge" because driving during the rush hour is simply less fuel-efficient than driving at other times when the roads are emptier.
Oil, gas and other natural resources
Other bits and pieces
There is then a whole list of much smaller monopolies, the value of which is in the order of a couple of billion, or perhaps only a few million every year, but it's useful to go through some examples:
Radio spectrum
Depending on the cost of the technology required to exploit frequencies fully, the government can just auction off twenty- or thirty-year licences for capital-intensive things like 3G, 4G. For bread and butter stuff like radio or television, the auctions can be for much shorter periods like a year.
Please note, the amount which the winning bidders pay for their licences has no impact on the prices paid by end-consumers, because the bidders worked backwards from their likely total income, deducted their likely real costs and a fair profit margin and the amount left over was what they were prepared to bid.
Cherished number plates
These are a government-created monopoly. It came up with the sensible rule that motor vehicles all have to have unique number plates to make it easier to track down offenders and recover stolen cars.
Then it noticed that some people were prepared to pay over the odds for the right to use certain numbers, so about thirty years ago, the UK government started auctioning off new number plates. It doesn't raise much money from this, about £3 - £4 million a year, but so what? It's a good principal and an entirely voluntary tax.
Fishing, angling, hunting
Having decided how much fish can be sagely caught from the North Sea without depleting stocks, the government can then auction off quotas on an annual basis.
If a town notices that there are too many hobby-anglers using a river, it can make a few quid by charging a daily rate for angling permits. The same applies to hunting and shooting rights.
Water and utility companies
Their monopoly income can be choked off at source by imposing price caps.
Copyrights, patents
Without the protection of international governments, nobody would earn much in royalty income. But protection of intellectual property stimulates creativity and innovation creativity - up to a certain extent - so it seems reasonable for governments to levy a tax on royalty income.
The system of patents is used by some to stifle innovation. Corporations (especially electronics and software) just register thousands of vaguely defined patents to prevent anybody else from actually turning a good into a viable product. I suppose you could deal with this by charging exorbitant registration fees for such vague ideas. If registering the design of an actual existing piece of technology were cheap or free (but making the owner liable to tax on the future profits) but it cost £1 million a pop to register a vague idea, then the practice would more or less cease overnight.
We can also looks at methods rather than sources:
Export restrictions
Where a country has a natural advantage in producing something for prices well below world market prices, it can lock in some of that saving for its own citizens by imposing export restrictions.
Nationalisation
Is always a fall-back, but approached with caution, as there is always mission-creep and a reluctance of politicians to accept that some industries ought best be shut down or privatised, so this often ends up as subsidies for unviable industries.
The government retains the monopoly and pays others to do the work
Works with oil, gas and natural resources.
Very high corporation tax rates
This is what Norway and The Netherlands do this with oil and gas companies.
"Windfall taxes" aka "fines"
Another fall back for governments when they think that large corporations are abusing a position of market power but can't quite pin down how or why, is to simple find them guilty of "anti-competitive behaviour" and negotiate a fine.
The EU does this every few years with Microsoft and the USA does it quite often with non-US banks.
