A progressive tax is one that chargers a higher tax rate for people who earn a higher income than others. The rationale behind progressive tax is that people with a lower income will spend more of their income in order to maintain their standard of living. The United States uses a progressive income tax system. Progressive tax income system reduces the tax burden on people who can least afford to pay. This system leaves more money in the pockets of those who earn less but habitually spend all their money and causes the economy to stimulate. The debate of using a progressive tax system is if it is fair to all taxes payers or not.
There is no perfect tax plan but there are ways to make sure that taxes and the amount of taxes being paid are just. From the rich elite to the poorest of the poor, from politicians to everyday Americans tax arguments have been discussed since the Mayflower landed on Plymouth Rock. Is it fair that those who earn more pay more? Yes, it is fair that people who earn more income should pay a higher proportion of their income in tax. Taxes is paid by all people to help with government infrastructure, the economy, and state entitlements. If we were to ask the poor to pay more that will not likely happened to due to the fact, they have no more income to give. Progressive taxation forms a buffer for the lowest earners in society.
This is because the lowest tax band will apply to earnings beneath an initial threshold. Therefore, the less one earns, the higher percentage of one’s pay is not taxable. This protection for the poorest is important, because most countries also operates customs tariffs and sales taxes, which tend to hit the poor more than the rich in terms of the proportion of their income going into indirect taxation; progressive direct taxation redresses the balance. When it comes to everyday living the consumers buy in order to survive.
From a middle class or lower-class perspective things being brought are out of necessity. When grocery shopping, you’re paying for the item plus the sales tax in order to get that item. The rich don’t worry about actual price because if they run out of something, they can easily replace the item. For those that are less fortunate they have to wait until the next paycheck in order to replenish supplies. The actions taking by the less fortunate help stimulate the country’s economy because they are spending more on the necessity’s for living. Progressive taxation encourages social cohesion. It sends out a clear policy signal that income and wealth are social means which can be used for the collective good. It also reduces the disparity in net pay and so lessens the economic divisions between different members of society. Progressive taxation should increase the total tax take. This means that increased funds are available for spending on worthwhile socially beneficial programs, such as education, health, environmental protection, and so on.
Progressive taxation acts as a discouragement to overinflated wages. There is a decreasing marginal benefit to high, of higher wages, since the earner will see less and less of the extra gross pay actually appearing in their net pay packet. Therefore, the upward pressure on pay will reduce and excessive remuneration will be less common.
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