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.
Jack Romario is a senior writer and analyst at solidpapers.com. The company offers term paper writing, mythology term papers and professional writing service. For more information, please visit solidpapers.com