Progressive Taxation essays

Progressive Taxation essays A Discussion on Progressive Taxation The United States government taxation system is based off the fundamental progressive taxation theory. Most people dont 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 governments tax revenues rise. What does this mean? Simple put, the higher the taxpayers 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 cau ...