Essay On Flat Tax

Tax is a compulsory contribution to state revenue, levied by the government on worker’s income and business profits or added to the cost of some goods, services, and transactions (Oxford Dictionary). The federal income Tax system is now at a center of public debate. To illustrate, The United States is currently practicing progressive tax system, which means a person who earns higher income pays higher tax rate. Whereas another income tax system is call flat tax, which is a tax system with a constant marginal rate in which all taxpayers are taxed at the same rate with no regard of the total income earned. Supporters for flat tax believe that flat tax is simple, fair, and good for the growth of the economy. However, there are some opponent ideas argue that flat tax does not do any better than progressive tax, yet it’s only benefit the rich people and cause middle class people to pay higher tax rate. As Republicans try to replace the current tax system (progressive) with a flat tax, opponents claim that our economy will sink without trace. But this is not the case; if people are taxed at a flat rate, they will be encouraged to save and invest more of their income since their investments will not be taxed at every turn (Ingram). Flat tax is proposed to boost economic growth by reducing tax burden on income and investment. Recently, the 9-9-9 proposal (nine percent personal income tax, nine percent sales tax and nine percent corporate tax), proposed by Herman Cain, is to keep the government from taxing too high levels and it would also regulate, possibly eliminate, the IRS and stimulate the economic growth. With the constant low tax rate, Joseph Bankman, a tax policy expert at Stanford Law School, supports that it is “necessarily fair.” As well as to prevent high tax rate, it would be simple to file tax with no confusion. The Department of the Treasury has created an extensive analysis of the flat tax and other alternatives as the lawmakers on Capital hill are seeking different ways to reform the tax code. Most flat tax proposals are based on earned income; meaning that unearned income like interest and dividends would escape taxation. People who work for a living would end up paying higher tax rates, which is not fair. We would rather choose to pay the same percentage taxes rate. For instance, a person who makes $100,000 a year will be paying 20%, which is $20,000. It will be fairer if everyone have to pay the same percentages of tax rates. My point is if you earn more you will have to pay more. If you earn less you pay less. No more confusing and it exactly makes sense to everybody. Moreover, rich people will be paying what is fair for their income and poor people will be paying less what is appropriate for them. On the other hand, forcing employer to pay too high tax rate may force the company to lose …show more content…
Flat tax provides choice, saves time, and restores fairness to the tax code. Proposal of a flat tax say that it would eliminate features of the tax code that could give taxpayers a hard time in filing taxes to the IRS. Under the flat tax system, American taxpayers will benefit by dealing with a simple tax that is easy to understand and report since it taxes all income at a flat rate. In summary, a flat tax would benefit businesses by reducing compliance costs and by stimulating economic activity. Income taxes would increase for many businesses, but eliminating the second layer of taxes on capital income would partially compensate business owners for the increase. Economists’ estimates of lower compliance costs and increases in economic activity suggest these factors would be more important than the tax increase. Overall, the flat tax would generally be positive for …show more content…
The middle-class people will have to pay more through a flat tax. But, what many people do not know is that under several flat tax proposals, “individuals and families would receive personal allowances – a set amount of income that is tax-exempt – that would limit their taxable income. This would allow the lowest-income brackets to be completely or nearly exempt from income taxes”