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Flat taxation system or progressive
Cons of flat tax
Flat taxation system or progressive
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The current U.S. tax program distinguishes rates by an individual 's income. This tax program is also known as the progressive tax program. The counterpart to this program is known as the flat tax program where everyone pays the same rate on income, regardless of one 's wage. This needs to change in order for everyone can be on the same income level. The Government should replace the current progressive tax on income with a simple flat tax in order to create economic fairness and to prevent tax evasion.
In particular, replacing the current progressive income tax with a flat income tax, the government would not support low income earners, but instead promote higher income. This would result in an economically fair country, by providing a common
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This occurs when a person or company evades tax obligations by use of foreign banks, or through progressive tax loopholes. According to the IRS, “13.7% of all taxes that should have been paid (Slemrod 2007)” (Doerrenberg and Peichl 294). Thirteen, and a seven tenths of a percent equates to a total of about two hundred ninety billion dollars lost to tax evasion. In order for the U.S. Government to prevent tax evasion, a flat tax should be installed because a flat tax would not allow any loopholes for tax evasion to occur, unlike its counterpart. A flat tax would not have any loopholes resulting from tax deductions. One of these loopholes for a business consists of using of tax havens which result in “a decrease in debt FPI (Foreign Portfolio Investment) ranging from 0% to 32.5%”(Hanlon, Maydew, and Thornock). Due to the fact that a business’s goal is to sell a product for a profit, any business would strive to save every dollar possible. For instance, businesses can send all their money to a foreign country that does not tax as much as the current American income rate in order to save money. This affects the American economy because these America based companies no longer have to pay income tax to the U.S. Government. These corporations contribute to a “loss in revenue of about $100 billion” (Conason). Of the two hundred …show more content…
Government. Supporters of the progressive tax believe that “An automatic increase of tax revenue generated by a larger tax base”(Piana). On the contrary, historical facts have shown that “the average federal tax rate for the top one percent of income earners fell by 1.1 percentage points in 1997 and a further 1.5 percentage points in 1998. Despite the cut, individual income tax revenues rose by 9.8 percent in 1997 and 10.6 percent in 1998” (Russell). Although raising tax rates would increase revenue, lowering the rate would increase revenue substantially more. This is caused from not only the nation’s richest earning more, but also the would impel the average family to earn more, which will in turn causes economic
Sixteenth Amendment- Authorization of an Income Tax – Progressives thought this would slow down the rising wealth of the richest Americans by using a sliding or progressive scale where the wealthier would pay more into the system. In 1907, Roosevelt supported the tax but it took two years until his Successor, Taft endorsed the constitutional amendment for the tax. The Sixteenth Amendment was finally ratified by the states in 1913. The origin of the income tax came William J Bryan in 1894 to help redistribute wealth and then from Roosevelt and his dedication to reform of corporations. I agree with an income tax to pay for all of our government systems and departments, but I believe there was a misfire with “redistributing wealth.” The redistribution is seen in welfare systems whereby individuals receive money to live. This is meant to be a temporary assistance, but sadly, most that are in the system are stuck due to lack of assistance in learning how to escape poverty. There are a lot of government funded programs, but there is no general help system to help lift people up and stay up, so there continues a cycle of
Since 1980, America has experienced a quick and drastic change in income distribution between the top 1% and the rest of the country. The graphs below from the Center on Budget and Policy Priorities show how tax policies implemented by the Reagan Administration have compounded over the past thirty-three years to create drastic income disparities.
Briefly explain the statement "Fairness of taxation is increased when more kinds of wealth are included".
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? Our current system of taxation is a varied percentage rate based on different income brackets. Many say that it violates our constitutional rights through unequal taxation. Multiple deductions, loopholes, special rates, and a complex system of regulations all characterize our Federal Income Tax System, prompting many to question why it is still being used (Peters, 2013).
The tax policy in the United States is very confusing. When the tax policy was originally written in 1913 it was four hundred pages. Now, over the past ninety one years, that tax policy has evolved to over 72,000 pages. Since the tax code has become so lengthy and nearly impossible to understand, the topic of tax reform has been in the minds of many. Although, most barely think about tax reform until tax season. It is a controversial subject due to the impact a change in tax code would have on the American people. The two most popular and widely known stakeholders in this debate are the two major political parties in the United States, the Democrats and the Republicans. The two parties share absolutely no common ground on the subject of tax reform, other than thinking the other parties solution is wrong. The Democrats, in general, want to raise taxes on the wealthy, while Republicans, generally, want to cut taxes for everyone (Democratic Party) (GOP). Unfortunately, with the United States economy currently doing so poorly, the parties can no longer afford to remain at a standstill, some sort of compromise is going to have to be made. The implementation of a flat tax, and discarding the current tax system would be a compromise that both parties can agree on and will simplify the tax code, overall benefiting all Americans.
The top 10 percent, and even more so the top 1% , are going through increases in income expon...
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...
Between 2009 and 2012, income gains by the top one percent increased by over 30 pe...
Income inequality in the United States, as of 2007, has reached levels not seen since 1928. In 1928, the top one percent received nearly 24% of all income within the United States (Volscho & Kelly, 2012). This percentage fell to nearly nine percent in 1975, but has risen to 23.5% as of 2007 (Volscho & Kelly, 2012). Meanwhile, in 2007 (see
Texas is one of the seven states that have no state income tax. This means the state does not impose an additional state income taxes on someone’s earnings, but there is still a federal income tax. While many claim this is beneficial to all of Texas citizens and promotes population growth others find it disadvantaging. Their is many disadvantages and advantages to not having a state income tax.
Income inequality has affected American citizens ever since the American Dream came to existence. The American Dream is centered around the concept of working hard and earning enough money to support a family, own a home, send children to college, and invest for retirement. Economic gains in income are one of the only possible ways to achieve enough wealth to fulfill the dream. Unfortunately, many people cannot achieve this dream due to low income. Income inequality refers to the uneven distribution of income and wealth between the social classes of American citizens. The United States has often experienced a rise in inequality as the rich become richer and the poor become poorer, increasing the unstable gap between the two classes. The income gap in America has been increasing steadily since the late 1970’s, and has now reached historic highs not seen since the 1920’s (Desilver). UC Berkeley economics professor, Emmanuel Saez conducted extensive research on past and present income inequality statistics and published them in his report “Striking it Richer.” Saez claims that changes in technology, tax policies, labor unions, corporate benefits, and social norms have caused income inequality. He stands to advocate a change in American economic policies that will help close this inequality gap and considers institutional and tax reforms that should be developed to counter it. Although Saez’s provides legitimate causes of income inequality, I highly disagree with the thought of making changes to end income inequality. In any diverse economic environment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. I believe income inequality e...
Because all economic brackets are taxed equally under a flat tax, earning more money is no longer discouraged. Because there are no more marginal tax rates, people will have incentive to work more without worrying that the extra money they make will be taxed higher. It is said that the economy would grow by 5.
Every year the multiple amounts of wealthy civilians in the United States get away with meager tax returns of their large amounts of income. With their amount of money the US can improve more than exponentially. Lawmakers should immediately increase the tariffs on the upper class to stabilize the middle class.
A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. The United States government has been fighting against the movement of corporations because it is not collecting taxes from these corporations that it could have used to reduce government debt. However, corporations have found loopholes that exempt them from United States tax laws. Companies are moving their headquarters across seas for tax benefits to keep their shareholders content. The United States government needs to reduce its corporate tax system so the country does not lose more companies, jobs, and money to foreign entities.
Income inequality is a big problem in the United States because the top, wealthiest American saw huge increases in their incomes, which the rest had their incomes go down. Bottom people do not have the same amount of money and the opportunity to move up the social ladder as the rich people do. In order to reduce income inequality, the government needs to tax the rich people more, and give poor people more money and more social services - education, food subsidies, health care.