Summary
To this day, it’s been found that the current taxation system is biased against people who are in the lower tax brackets. There is an increase in income of an individual and tax rates, which is called a progressive tax system. The individuals that fall under the low income pay 14% as income tax, and those fall under high income pay 38% in taxes. These exemptions from the rich upset many people, therefore flat tax comes into play. Flat tax is a single taxation, approximately 17%, which would be applicable to any citizens, not based on what they earn. This would shift the tax system from progressive to proportional.
There are some advantages and disadvantages that come with flat tax. One advantage is that everyone would only have to pay a single tax rate. Today, any person who earns more, pays more and if the system switches over to flat tax, it would encourage individuals to be more productive. The second advantage is that flat tax would remove double taxation. Taxes on dividends and capital gains are removed because they are incomes which after being taxed are taxed again. Lastly, another advantage is that filing for flat taxes would become easier, saving time and energy. This would also cause tax evasions to be unlikely.
The one main disadvantage would be that the reduction in tax rates, means that the individuals who earn more, pay less. This will reduce government revenues immensely. If there’s one tax, it’s most likely to cause government a huge loss in revenue. Moreover, even though there are benefits to an uniform tax, there’s still an opinion among society that the rich should pay more.
Connections
From this article, the progressive approach that is today’s taxation is frowned upon because the percentage of income in taxes increase the individual’s level on income. The author is bringing into consideration proportional tax because it would mean that the percent of tax stays the same weather you have a high or low income. Also, the Everyday Economics topic, “Flat Tax: Fair or Foul?”(page 134), ties into this article because it states that flat tax is fair and would save a lot of time. The article in the book also touches matches with the article I found based on the information about the benefits of less tax evasion and the disadvantage of benefiting high-income people more than low-income people.
Reflection
In my opinion, I believe a flat tax would be a smart tax system development because it would relieve a lot of stress off many individuals and it’s much easier on the people who do their taxes. Not to mention, soon we will all be filing tax returns too. Anyways, paying one standard tax rate, creates more equalization among individuals and brings us to a proportional tax system. Although flat tax may benefit high-income individuals more than low-income individuals, I still think that this one disadvantage can be overlooked if you take into consideration all the advantages because I believe that no matter what happens, high-income individuals will always have somewhat of an advantage.
