Proportional Tax Is Better Than Progressive Tax
The existing myth holds that the personal income tax system under the progressive marginal rates embodies value of social solidarity, justice, and fairness. The proponents of the progressive tax system entrusts that the rich should pay more than the poor as a way of creating a level of sacrifice (Wiegarden, 2012). To supporters of the progressive systems, the sacrifice is progressive tax rates and measurable thus produce equal results. For example, the person with high income needs to sacrifice more of their incomes to benefit the State. Therefore, the high income translates into high tax rates. Although the progressive tax regime befits the declining marginal utility theory, it is unclear how the progressive tax would benefit the tax payer.
The flat tax system offers equal pay for equal work. Unfortunately, for the progressive tax system, the arbitrary iniquity and nature of the progressive tax rates would illustrated by the example of an employee who works for 22 hours a week at a gross hourly wage of $25. With such employee’s income, the worker is within the upper limit with high taxable income at marginal rates of about sixteen percent (Mullen, & Williams, 1994). Undeniably, the progressive tax system reduces the employee net income, especially for the workers who opt to work for extra time. Indeed, the additional hours pay the least net wage. As such, the workers have insignificant incentives to remain productive. The employees have low incentive to create wealth. The progressive tax system bars the individuals from ascending to the higher income levels. For example, the imposed tax burde...
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Mullen, J., & Williams, M. (1994). Marginal tax rates and state economic growth. Regional Science and Urban Economics, 24(6), 687-705.
Snell, K. (2016, Jan 27). Sanders and the Robin Hood tax: A new price tag for Clinton’s tax plan and the political divide on inversions. The Washington Post. Retrieved from https://www.washingtonpost.com/news/powerpost/wp/2016/01/27/sanders-and-the-robin-hood-tax-a-new-price-tag-for-clintons-tax-plan-and-the-political-divide-on-inversions/
Wiegarden, W. (2012, Oct 9). The Robin Hood tax system” Taking from the rich to give to the poor. Forbes. Retrieved from http://www.forbes.com/sites/econostats/2012/10/09/the-robin-hood-tax-system-taking-from-the-rich-to-give-to-the-poor/#7aa966b84745
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