Progressive and Regressive Taxes A progressive tax is defined as a tax whose rate increases as the payer's income increases. That is, individuals who earn high incomes have a greater proportion of their incomes taken to pay the tax.
That is an subtle but important difference. If those with lower incomes had more money to pay in taxes, they would, you know, not be poor. Likewise, the middle class is often extended on credit.
There really is only one class with the ability to pay higher taxes, that is those with higher incomes and more wealth. This is why a progressive tax makes more sense in general.
The devil is of course in the details, as loopholes and the placement of brackets matter greatly HINT: When we consider that some are making tens of millions and others billions, and most of that is in capital gains, we can affirm that there are more pressing problems in terms of fairness than the income tax.
Considering Ability to Pay and Total Tax Progressive v flat tax Above we covered the basics, below we will explore each aspect discussed above.
When we take into account all tax types, we can say: Federal taxes are progressive on aggregate as you can see in the Tax Policy Center images belowbut the progressive federal Income tax is essentially the only thing ensuring this under our current system.
If we flatten that tax, then lower incomes are squeezed even harder… while higher incomes get a tax break. With all of that said, there are some valid lines of reasoning regarding the logic behind a flat tax and its fairness.
The argument above generally applies to federal income-related taxes. So it applies to the federal income tax, the federal capital gains tax, and the federal corporate income tax. See an argument for the estate tax. It is one of the only taxes that addresses the wealth gap!
Just take another look at the Tax Policy Center charts above and below. Ideally taxation should be progressive, subsidization regressive tapering off slowing, avoiding cliffsand otherwise as simple as possible while remaining fair.
Of course, this assumes the underlying problem is tax structure alone. Under a flat tax wage earners are taxed twice income and payroll and dividends only once income. Pair this with the fact that payroll, property tax, and sales tax are already somewhat regressive and flat as the more you make the less they hurtand the flat tax argument gets that more difficult to make.
Since there is a cliff, where when you make more you pay less, the tax can be described as regressive. This tax burdens lower-incomes more than higher ones accordingly. Same would be true for a flat income tax.
A Modified Flat Tax: When we compare these modified flat taxes to our current progressive tax system loopholes and allthe conversation gets more complex. Crash Course Economics This video by PBS has economists look at progressive, regressive, and flat taxes, and how those and other taxes affect America and the world.
This is probably the best tax video online.Flat tax with exemptions has progressive effects on poor "Class warfare and the progressive income tax".
Wirkman Netizen. 28 Oct. - "you say, a flat tax is not a . Aug 07, · Technically, you can create a progressive income tax system even when stated tax rates remain flat by using personal exemptions, tax credits and tax deductions to alter the effective tax rate.
Flat tax with exemptions has progressive effects on poor "Class warfare and the progressive income tax". Wirkman Netizen.
28 Oct. - "you say, a flat tax is not a . Apr 28, · BTW There is another option between flat and progressive taxes hybrid tax systems where tax payers pay the lower of a flat tax and a traditional progressive tax Reviews: Progressive Versus Flat Tax.
Supporters of the progressive system claim that higher salaries enable affluent people to pay higher taxes and that this is the fairest system because it . Establish a flat tax for single folks at $30,, single with up to 2 kids at $45,, married couple without children at $35,, married couples with up to two kids at $50, Maybe something like that where they compromise on using flat tax and progressive tax.