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Progressive
Taxation
The United States government taxation system is
based off the fundamental progressive taxation
theory. Most people don t fully understand the
taxation system and question the validity of the
system the United States currently has. However,
I believe that progressive taxation is the best
system for the majority of society.
The progressive taxation system is most evident
in the income taxes; the tax is levied at a rate
that increases as the quantity of income increases.
This system was devised to collect a greater proportion
of tax revenue from wealthy people reflecting
the ability-to-pay principle. Usually, progressive
taxes are the stabilizing force in periods of
inflation or recession because the |
amount of tax revenue changes
more than proportionately with the increase or
decrease in income.
In an economy where the prices and incomes are
rising, the dollar value of tax credits and allowances
remain constant. However, as individual income
increases, the taxpayer is moved into a higher
tax bracket. This means that a greater percentage
of their income goes toward taxes. At the same
time, the government s tax revenues rise. What
does this mean? Simple put, the higher the taxpayer
s income, the more money given to the government
to spend on programs and strengthen the overall
economy. By either reducing tax rates or increasing
spending, the government can stimulate or restrain
private demand.
There are negative effects to progressive taxation.
During inflation, it can actually hurt the people
that this system is trying to help by shifting
the tax burden to the less able and increasing
the power of the government to control the economy.
There is no real solution to this. Also, many
believe that this type of taxation is punishing
the rich for working and earning their money.
This may be true to one extent, but a fixed rate
for all people will cause more harm than good.
Also, the taxpayers on the lower end of the scale
pay the recessive taxes that are involved in the
American system. So the rich may pay more income
tax, the poor equal it out with the recessive
taxes. In this system, the taxpayers end up paying
for what they use.
Progressive taxation is not a perfect plan. However,
under the limits and restrictions that lawmakers
have applied to this system, progressive taxation
helps the whole society. The proposed tax cut
in Bush s plan is more of a tax shift. It will
provide tax relieve for the rich and cause the
recessive taxes to be increased. This will only
mean that the lower end of the tax bracket will
be paying the difference. Hopefully lawmakers
will see that the Bush s tax cut plan should not
be passed and allow for the progressive taxation
system to work. |
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