Taxes are a mechanism used by many governments around the world to generate money, to hopefully improve their country or community. Many countries use a progressive tax on their citizens, but is this system fair? Can a progressive tax system work to help redistribute money, decreasing inequality of sacrifice throughout a society, or it is just a moneymaking scheme?
Income tax is one form of tax paid by those in the labor force to the government. There are different types of taxes that governments can use when asking for money from the public: regressive, proportional, progressive, and lump sum. A regressive tax is when taxpayers in the lower-income bracket pay a higher fraction of their income than high-income taxpayer. A proportional tax is when everybody pays the same flat rate, regardless of his or her amount of income. A progressive tax is when higher-income taxpayers pay a higher fraction of their income than lower-income taxpayers do. A lump-sum tax is similar to proportional where everyone pays the same, but in this case it is the dollar amount; everyone pays the same dollar amount in taxes regardless of their amount of income. Progressive tax is commonly used in a majority of countries around the world, including the United States in regards of their income tax.
F.A. Hayek does not have a very positive view on progressive tax; he believes that it is discriminatory, and agrees with John Stuart Mill’s portrayal of it as “a mild form of robbery.” Hayek says that the purpose of progressive tax is to attempt to close the gap between the two extremes, the rich, and the poor. It is to stop the rich at the top of the spectrum from furthering their wealth, Hayek says in “The Constitution of Liberty,” “But it would not produce th...
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Friedman, M. (1962). "The Distribution of Income. In Capitalism and freedom (pp. 173-175). [Chicago]: University of Chicago Press.
Hayek, F. A. (1960). Taxation and Redistribution. In The constitution of liberty (Vol. XVII, pp. 436-439). Chicago: University of Chicago Press.
Income tax in the United States. (2013, September 12). Wikipedia. Retrieved December 10, 2013, from http://en.wikipedia.org/wiki/Income_tax_in_the_United_States
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Briefly explain the statement "Fairness of taxation is increased when more kinds of wealth are included".
“No taxation without representation!” A fair tax system was what the American colonists were looking for and one that many say we are still trying to achieve. Today, while we are all represented in government and are all required to pay taxes, some still perceive the system of taxation as unfair, allowing for specialized interests, loopholes, as well as more/less taxation based on income. Should the American tax system remain the same, where individuals’ income is taxed based on how much one makes with loopholes and deductions? Should we consider a system that would eliminate progressive income taxes, taxing everyone at an equal rate through the Flat Rate Tax or should taxes be collected through national consumption of retail goods and the Fair Tax System?
...e, Maxime, and Giuseppe C. Ruggeri. "Flat Taxes And Distributional Justice." Review Of Social Economy 56.3 (1998): 277-294. Business Source Premier. Web. 19 Jan. 2014.
(TRANSITION: But before we get into all of that, the questions I asked you for my audience analysis revealed that not all of you are as riveted by tax policy as I am-shocking I know-, so I will clarify some of the jargon I will be using. First the progressive tax is a tax system where the tax rates increase with income earned. Let’s say the first tax bracket is set at 50,000 dollars, and the first tax rate is set at ten percent, and the rate above it is set at twenty percent. So, if you make 70,000 dollars, the first 50,000 will be taxed
Briggs, Vernon. (1998, June 1). American-Style Capitalism and Income Disparity: The Challenge of Social Anarchy. The Journal of Economic Issues, Vol. 32, 473 (8).
Many ponder the idea of federal taxes and whether the wealthy deserve to pay a higher percentage rate of their overall income. That is, they argue that because our society needs more equality and a lower national budget deficit, taxes on the rich must be raised. This specific topic has been discussed for decades, and due to the severely different perspectives, it is unclear whether the two sides will ever come to an agreement. President Barack Obama and much of the Democratic Party strongly lean towards raising taxes on the rich, while the conservatives and the Republican Party heavily lean towards a more balanced flat tax. However, after extensive research and focus on what would be best for the equality of individuals, the nation and its economy, this paper will firmly prove that the top one percent should not be taxed any more than they are today.
Introduction: In the year 1862 during the civil war congress implemented the first income tax in America. It was 3% per year. However, it was not until 1913 when the 16th Amendment to the Constitution was passed, which granted the government the ability to impose a tax on individuals’ income. Since then it has been an issue to determine how much people should be taxed. Tax rates in America change drastically; for example, in 1963 a person in the highest tax bracket would give 90.8% of their income to the government. In contrast, that same person would only pay 28.0% in 1988. The tax rate for income tax is an issue because for every dime that someone pays in taxes is one dime that they are not able to spend themselves. Additionally, people
Price, Mark. “The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2011.” Economic Policy Institute. N.p., 19 Feb. 2014. Web. 30 Apr. 2014
In the United States there are four social classes : the upper class, the middle class, the working class, and the lower class. Of these four classes the most inequality exists between the upper class and the lower class. This inequality can be seen in the incomes that the two classes earn. During the period 1979 through the present , the growth in income has disproportionately grown.The bottom sixty percent of the US population actually saw their real income decrease in 1990 dollars. The next 20% saw medium gains. The top twenty percent saw their income increase 18%. The wealthiest one percent saw their incomes rise drastically over 80%. As reported in the 1997 Center on Budget's analysis , the wealthiest one percent of Americans ( 2.6 million people) received as much after-tax income in 1994 as the bottom 35 percent of the population combined (88 million people). But in 1977 the bottom 35 percent had about twice as much after tax income as the top one percent. These statistics further show the disproportional income growth among the social classes. The gr...
Reich, Robert B. “Why the Rich Are Getting Richer and the Poor, Poorer.” A World of Ideas:
Sutter, John. “What is income inequality, anyway?” CNN. 29 Oct. 2013. Web. 13 Feb. 2014.
The current tax system that the United States uses contains several flaws. First of all, it is very complex. It is comprised of many various variables that can create loopholes. These loopholes can cause two equal income families to be paying very different tax rates. In fact, there are 480 different types of tax forms (Website). The current tax system is also very unfair for the wealthy. Because it is a progressive tax, it is higher for people who have higher incomes. People should not be punished for being successful. If a flat tax policy were instituted, then it would simplify the complicated tax system, create fairness within the economy, and promote a desire to thrive financially.
-Hyman, David M. (1990) Public Finance: A Contemporary Application of Theory to Policy, 3rd, Dryden Press: Chicago, IL
The famous literature on principles of taxation was embodied in Adams Smith “Canons of taxation”. Since then, economies have adopted (and adapted where necessary) these basic principles for what is regarded as the most important tool of fiscal policy.
Stewart, Charles T., Jr. "Inequality of Wealth and Income in a Technologically Advanced Society." The Journal of Social, Political, and Economic Studies 27.4 (2002): 495-512. Print.