PROGRESSIVE TAX
Most critics find the tax code to be complex and difficult for the average tax payer to decode often involving a qualified specialist. Also, the Director of the Internal Revenue Service (IRS) has acknowledged that the ambiguity of the taxation system leads to both truthful errors and tax avoidance. Some go deeper, arguing that the progressive income tax is fundamentally unjust, because it puts an undue burden on the powerful. In the sense of this critique, the opponents argue that this burden prevents conduct that would encourage economic development (Pidduck, 2019). If the state were to reshape the framework to improve this, the logic goes, everyone will profit from the more productive overall economy. Even though they both have similar objectives and will entail a massive overhaul of the existing structure, there are several fundamental aspects in which the proposals vary. So, although flat tax will tax all profits at the same rate, FairTax would not income tax at all it would then create a nationwide sales tax. First, we’ll explain the relationship in more depth. Neither does the progressive tax proposals nor the FairTax proposals are completely new concepts.
The United States introduced a flat income tax for a short period of time after the Great war. Most cities and states use flat taxes today, however the FairTax unique program is fairly recent and goes back to the mid-1990s. Do you realize that the US government depended on income tax even before tax rate was fully implemented with the passage of the 16th amendment was ratified? To recognize how fundamentally different the two proposals are, let’s look at how both of them will function (Huang, 2019). Flat-tax proponents agree because the only equitable income tax will apply the same amount to all citizens. In particular, several proponents are proposing a rate of 17 per cent. In many other words, if one person has made $60,000 a year and someone made $200,000 a year, both could pay the government 17 proportion of their income. Even though plain economic policies remove almost all of the exclusions, loopholes and exemptions that lead in most of the difficulty of the existing system, numerous types have included a family exemption. Proponents say that, with a fair tax, most people would be able to calculate their federal and state taxes on an easy post card.
References
Huang, C. C., Chang, J. J., & Hung, H. W. (2020). Progressive Tax and Inequality in a Unionized Economy. The Scandinavian Journal of Economics, 122(1), 38-80.
Pidduck, T. M., Odendaal, K., Kirsten, M., Pleace, L. A., & De Winnaar, K. (2019). Progressive tax: a proposal for customer loyalty programmes. Pacific Accounting Review.