Generally
accepted economic definitions.
Progressive
tax rate system:
A
tax that takes a larger percentage from the income of high-income
earners than it does from low-income individuals. The United States
income tax is considered progressive: in 2010, individuals who earned
up to $8,375 fell into the 10% tax bracket, while individuals earning
$373,650 or more fell into the 35% tax bracket. Basically, taxpayers
are broken down into categories based on taxable income; the more one
earns, the more taxes they will have to pay once they cross the
benchmark cut-off points between the different tax bracket levels.
Flat
tax rate system:
A
system that applies the same tax rate to every taxpayer regardless
of income bracket. A flat tax applies the same tax rate to all
taxpayers, with no deductions or exemptions allowed.
A
regressive tax rate system: Also called a “Fair Tax” by its
proponents.
Some
examples include gas tax and
a sales
tax. A
simplified
example: If
a person has $10,000
of income and must pay $1,000
sales
tax on an
auto
purchase,
this represents 10% of the person's income. However, if the person
has $100,000
of income, this $1,000
tax only represents 1%
of that person's income. Regressive
means that those least able to pay the tax must pay a higher portion
of income
than those more able.
Most,
if not all developed countries, have some form of progressive tax
system. While the system requires periodic revision and
simplification it seems to be the best method to prevent wealth
accruing to the few and the
lowering the standard of living for the many. It
helps to grow the job creator* aspect of consumer driven economies.
Flat
tax proposals have been offered by some political candidates as an
alternative to a progressive system. In order for such a tax to be
revenue neutral, (no loss or gain in government revenue), the tax
rate selected would have to be increased
for the bottom half of earners and decreased for top earners. The job
creating consumer would have less purchasing power under this
concept.
Efforts
to enact a national sales tax, also known as the”Fair Tax” has
waned. The
tax rates required to match
existing revenue would be very damaging for the job creating working
class consumer.
Most
individual states levy a sales tax on many consumer goods and
services. At
present Ohio
has a combination of a
progressive income tax and sales tax.
The
current Ohio governor is tending toward the elimination of the income
tax. Ohio
has to maintain a balanced state budget
where
expenditures must match revenue. In this poster's opinion the result
of such a shift will require a sales tax rate increase and an
expansion of items taxed. The result will be a spiral of higher
priced goods and services and a lowered ability to consume those
goods and services.
*If
the demand for cars and widgets declines will the car manufacturer
and widget maker invest in new plant and equipment? Will new jobs be
created if
consumption
declines?
Paul
Hunter paulhunter45177@gmail.com
