In theory, it’s not the most economically efficient. We want people to work, and taxing labor decreases the incentive to work. However, there isn’t any viable alternative given the current circumstances. Labor creates all value in society and you can’t easily hide labor off shore (though I guess that’s what happened with globalization and China).

One should understand that income tax should be a tax on the consumption of labor (just as a tariff is a tax paid by the importer/consumer). Right-wing politicians have made the employee pay the income tax (to decrease acceptance of the system), but it should always be the employer that pays the tax.

If we start to call income tax labor VAT or something similar, that would probably solve a lot of misunderstandings.