Progressive Verse Flat Tax System Essay Example

Recently, a controversial debate has risen in the United States concerning tax payment among the citizens. The issue of progressive taxation verse flat taxation has inspired the ongoing discussion, and both have supporters and critics. The country prefers progressive tax systems where citizens are charged with respect to their income (Pantya et al., 2016). Democrats support higher tax rates on high-income people and lower tax cuts among the lower and middle-class citizens. On the other hand, Republican advocates for a lower tax and fair tax rate for all people. Simply expressed, a flat income tax advocates an equal fairly low percentage rate on the income of all Americans regardless of the income size. Contrary, a progressive tax system prescribes an establishment of a different marginal rate for diverse levels of income (Zhao, 2017). In the current system of progressive taxation, low-income citizens are charged about 10 percent in federal taxes while the wealthy people pay almost 40 percent. Indeed, these two systems of taxpayers are considered to be fair since they apply a rational approach to taxation (Brownlee, 2016). However, the conflict arises in the manner in which the wealthy are treated, and the system may be regarded as being unfair.

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A progressive tax system is considered to be fair since it considers the status of the poor in society. Indeed, it lessens the tax burden of the low earners. The poor are believed to have low-level of income and a huge percentage of their salary is spent to cater for basic survival such as household needs (Saez & Stantcheva, 2016). On the other hand, affluent people have huge income implying that they are better placed to manage all their needs at ease, and therefore, have to pay huge taxes. A flat tax tends to ignore this perspective that exists between the poor and the rich an aspect that is considered as being unfair by the majority (Ferreira & Veiga, 2016). The rich feel being exploited when they pay more tax an aspect also seen as being unfair to the wealthy. Flat tax considers one fair tax rate where all people regardless of income level have to carry equal responsibility. High taxes among the rich do not discourage them to earn more, and also cut tax rate among the poor encourages them to work for increased salaries.

One of the primary roles of the government is to protect its citizen's property. As a result, the government spends a lot on ensuring the safety of the citizen's assets, and therefore, it needs more money to cater for this practice (Brownlee, 2016). Wealthier people are believed to own more assets in the country compared to the poor. With respect to this, the government uses a progressive tax system technique to differentiate tax income between those who consume more or less of the public services to cater for the extra currency needed by some citizens (Saez & Stantcheva, 2016). Therefore, it is with no doubt that progressive tax system values the low and middle-class individuals who might find it difficult to cater for high tax which will be incomparable to what they earn.

Certainly, progressive tax does not burden the poor as much as a flat tax does. Therefore, the disadvantaged people have a privilege of lower cost when it comes to enhancing a meaningful standard living (Pantya et al., 2016). Inequality in sales taxes targets the low-income individuals who are required to spend almost everything of their income, yet they are charged similar tax rate per purchase like those who are can spend more and still remain with a large portion to save. For example, cutting the tenth percentile of a poor person's salary has an adverse effect on his living standards as compared to taking the same amount of tenth percent from a rich person. Studies have proved that a progressive tax system has a societal benefit as it prevents the poor from remaining in poverty (Zhao, 2017). Also, it allows for flexibility in identifying how not only duty incomes are conceived but also who gets greater leeway in society.

The argument that increased tax among the rich lowers working incentives has never been the case. However, for lower-income citizens, taxes play a huge role in influencing their incentive to work (Brownlee, 2016). In other words, a flat tax system would encourage unemployment among the poor since the proportion of salary taken home has dramatically reduced. As a result, if taxes turns to be much regressive, poor people will prefer staying at home rather work (Ferreira & Veiga, 2016). Therefore, a progressive system of tax payment seems beneficial as it shows concern to the disadvantaged people in society.

Conclusion

In conclusion, progressive tax systems seem to be beneficial over the flat tax. The former enables the poor to live comfortable life since they can easily manage their responsibilities with the little income. On the other hand, the latter seems to be a burden to low-income individuals since the system advocates for an equal tax to all people but this will be a challenge to the poor as they cannot manage hug pay cut. Though the progressive tax system seems to be unfair to the rich, it is the best system to enhance equality in a stratified society.

References

Brownlee, W. E. (2016). Federal Taxation in America. Cambridge University Press.

FERREIRA, R. M. Z., & Veiga, F. (2016). The Revolution of the Tax System based on Flat Tax. Athens Journal of Law, 253-268.

Pantya, J., Kovacs, J., Kogler, C., & Kirchler, E. (2016). Work performance and tax compliance in flat and progressive tax systems. Journal of Economic Psychology, 56, 262-273.

Saez, E., & Stantcheva, S. (2016). Generalized social marginal welfare weights for optimal tax theory. American Economic Review, 106(1), 24-45.

Zhao, Z. (2017). The Insurance Value of Progressive Taxation with Heterogeneous Risk Aversion.