preview

Progressive System Of Taxation

Good Essays
The United States federal tax code contains over four million words and 73,954 pages. If you were to browse the tax code’s table of contents it would offer a glimpse into the complexity of the federal taxation. Annually there are changes to the tax code which implies that taxes will continue to become more and more complex even though politicians are constantly debating a way to simplify it. Taxes that are levied by jurisdictions, such as cities and states, just add even more complexity to taxation in the U.S. Across America there are billions of hours every year working on their taxes, and let’s not get started on the costs of accountants. Currently the United States is operating under a progressive system of taxation. Under a…show more content…
A progressive tax addresses economic inequalities in a society. When evaluating the impact of a tax system on inequality, both the distribution of taxes compensated and the distribution of tax revenue benefits should be considered. If the benefits of tax financed programs accrue mainly to lower income families, while higher income families pay the majority of taxes, then the tax system actually functions as growing the progressivity of the tax system or changing the distribution of benefits. A radical tax system is also a mechanism to address monetary inequalities in a society.
There is also an economic argument for a progressive taxation that it can provide a certain level of public revenue with the lowest possible impact. To understand how, look at how households with distinct income levels would react to a $100 tax cut. A low- income household usually is quickly to invest the total amount of goods and services required, thus injecting $100 more into the economy. In comparison, a high-income household could spend a fraction on goods and services only, choosing to save or invest a portion of the money. The money that a high-income family puts back or invest does not add anything to the general level of efficiency in the demand of an economy. So, speaking like an economist, we would say that the marginal propensity tends to decrease as the individual’s income increases.
Of course, it can be
Get Access