A Flat Tax System

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Recommended: Similarities between a progressive tax and a regressive tax

A flat tax is a system of taxation that taxes at a uniform rate, regardless of income level. In the United States we currently use a progressive tax system, which means that high-income earners pay taxes at a higher rate than low-income earners. A flat tax rate is a tax system can uses a constant percentage as a deduction, which is applied to individual income. There are various tax systems that are labeled a flat tax even though they are significantly different. A true flat rate tax is a system of taxation is where one tax rate is applied to all personal income with no personal deductions. A flat tax is a tax that is applied at a consistent rate with no variables in its application. In contrast with progressive or regressive taxes, where …show more content…

Otherwise, it would be theoretically possible for a person to earn more money but actually end up with less, due to the entire amount being taxed at the higher rate. Progressive tax systems allow for a number of adjustments to taxable income, such as exemptions, deductions, and tax credits. These can be used to provide additional relief to low-income citizens, or to encourage certain types of behavior, such as business investment, higher education or purchasing a home. In a progressive system of taxation, there is a greater portion of personal income that gets taxed at certain income levels. Someone making $25k per year, for example, may have a 10% tax rate on this income. Someone earning $50k per year would pay 10% taxes on the first $25k they earned, but then 15% on the remainder of the amount. In the United States, the top tax rate typically hovers around 35%. A progressive tax policy requires individuals with higher incomes and wealth to pay taxes at a rate that is higher than those with lower …show more content…

Shifts tax burden to those most able to pay.
2. Protects the taxpayer during hard times, when income is reduced, the tax rate also become shifts to a lower bracket.
3. Those who earn the least amount are required to contribute the least amount for services to be rendered, keeping the income gap closer than it would be otherwise.
4. If everyone paid the same percentage rate on their income, the poor would wind up paying a greater total amount of their income than the rich.
5. The progressive system of taxation takes more when people make more so that the entire nation benefits instead of just a select few.
6. When a person’s income falls, so does their taxation responsibilities. .

CONS
1. Inflation can push taxpayer into a higher tax bracket, with no real increase in income after adjusting for inflation
2. Individuals with high earning potential may leave the country to avoid high taxes
3. It can discourage business investment and expansion, as additional profit is taxed at higher rates
4. Imposes a discriminatory penalty on those who are able to make more from their creativity, skills, and talent.
5. It encourages the wealthy to not be transparent about their income. The wealthy are able to take alternative income methods that the working public cannot take to limit their taxation

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