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Flat Tax vs. Progressive Tax

Flat Tax vs. Progressive Tax

The Progressive Tax system of the United States of America has been in place since the time of Abraham Lincoln. Many people argue that the progress tax system is unfair because tax rates create more of a burden on lower income wage earners. Reform is being considered, one plan is the Flat Tax, which states everyone will pay at the same tax rate.

 

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Kevin West

Kevin West

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Do you have a business of your own? Do you know that you can save money on tax by taking the advantage of certain business tax credits and deductions? If you spend money to improve the lives of the disabled persons, then you’re eligible for certain tax benefits. As for example, you can improve public access to your company or help the disabled employees and save money on tax.

Article: Credit Terms
Source: 3 Types of business tax c...
Kevin West

Kevin West

5 Knowledge Cards 

1)    Explain what progressive taxation is and how it works              

2)    What factors do the progressive taxation system rely upon and how do their factors affect the tax rate for the American citizen.              

3)    Compare the advantages and disadvantages of the progressive taxation system and how it effects American society. 

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The New Flat Tax—Easy as One, Two, Three

Abstract: The current tax system discourages saving. It discourages investment. It discourages entrepreneurship. It causes decision makers to misallocate the nation’s resources, limiting productivity gains, wage gains, and the nation’s overall level of international competitiveness. And, it is far, far too complicated. The New Flat Tax is the remedy. It replaces every major tax collected by the federal government. For non-seniors, it is as easy as one, two, three—one rate, two credits, three deductions. For seniors on Medicare, one of the two credits—for health insurance—is replaced by an extra deduction. The New Flat Tax is simple, revenue-neutral, and will allow America to achieve its full economic potential.

Article: Send this report to a fri...
Source: The Heritage Foundation -
Kevin West

Kevin West

5 Knowledge Cards 

1)     Summarize Paragraph 2 in your own words.      

2)     Analyze and explain the difference between a national sales tax and a flat tax.        

3)     Rate the six major features described in the article in order of importance in your judgment. State your reasoning for the order you have decided on. 

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So the tax system is moderately progressive until you get up to the 5,000 richest people in the country, at which point it becomes regressive.

However, this includes only federal income tax and payroll taxes. It doesn't include excise taxes, state income taxes, sales taxes, or property taxes. If you add in all that stuff, things get even flatter. The chart below doesn't include imputed corporate incomes taxes or the employer portion of the payroll tax, so the overall numbers are lower than they should be, but it still gives a pretty good idea of the overall flatness of our tax system:

Article: The Washington Monthly
Source: The Washington Monthly
Kevin West

Kevin West

5 Knowledge Cards 

*Use the corresponding graphs from this source to anwer the following:

1)     After analyzing the chart above what conclusion can be drawn regarding the level of taxes that each income level pays?                

2)     Interpret the information in the chart above and explain the tax responsibilities for each income group. Do you consider this to be fair or unfair?          

3)     In your opinion does this chart support the flat tax or progressive tax system? Explain your answer.    

 

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This is a straightforward question of fiscal policy – should people who earn more pay direct tax (tax on income) at a higher rate or not? Where progressive tax rates operate, different rates usually apply for different bands of income. For example, the first $5000 of income might be tax-free, the next $20 000 of income might be taxed at 20%, income between $25 000 and $50 000 at 30% and any income above $50 000 at 40%

Article: Debate: Progressive tax v...
Source: Debate: Progressive tax v...
Kevin West

Kevin West

5 Knowledge Cards 

*This is a suggested link (OPTIONAL) please keep it in mind when finishing your prompt

Prompt:

Determine which tax system you endorse, either Progressive or Flat Tax. Explain the similarities and differences between the two tax systems. Be sure to evaluate how each system of taxation functions and describe the positive and negative effects on the citizens of the United States

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