Progressive Tax Rate

Last updated: June 20, 2016

Should the tax rate be progressive?

Progressive Tax Rate
Yes because...

It is fair that people who earn more income should pay a higher proportion of their income in tax. ...

It is fair that people who earn more income should pay a higher proportion of their income in tax. The tax supports the administration of their country which provides the sort of operating environment in which they are able to earn their wages in the first place. Even when paying a higher marginal rate on the top end of their earnings, they will still take home more than people who are paid less with a tax rate anything up to 100%.
No because...
It is unfair that people who earn more should pay at a progressive rate. Even on a standard rate, they already pay more tax, because they have a higher taxable income. Therefore progressive tax rates are a form of double taxation, as higher earners pay tax on more income, and then at a high level. This is further unfair to them since high earners are the least likely group to benefit from much taxpayer-funded activity e.g. welfare.

Progressive Tax Rate
Yes because...

Progressive taxation forms a buffer for the lowest earners in society. This is because the lowest t...

Progressive taxation forms a buffer for the lowest earners in society. This is because the lowest tax band will apply to earnings beneath an initial threshold. Therefore, the less one earns, the higher percentage of one’s pay is not taxable. A certain “block” at the bottom of each income may be tax free altogether, and by definition this will form a much larger proportion of a low earner’s income than it would in the income of a high earner. This protection for the poorest is important, because most countries also operate customs tariffs and sales taxes, which tend to hit the poor more than the rich in terms of the proportion of their income going in indirect taxation; progressive direct taxation redresses the balance.
No because...
Progressive taxation is a form of large-scale redistributionist economics that simply pushes the burden of funding government activities higher up the income chain in larger amounts. As well as being unfair, this concentration of taxation amongst a narrow group of taxpayers introduces a higher risk of a sudden drop in tax take, for example if a recession means lots of executive jobs are cut in a short time period.

Progressive Tax Rate
Yes because...

Progressive taxation encourages social cohesion. It sends out a clear policy signal that income and ...

Progressive taxation encourages social cohesion. It sends out a clear policy signal that income and wealth are social means which can be used for the collective good. It also reduces the disparity in net pay and so lessens the economic divisions between different members of society.
No because...
Progressive taxation can encourage talented workers who earn high incomes to move overseas to escape the tax system. This can create a “brain drain”. Alternatively, as the marginal benefit of extra work falls, they may be less keen to spend more time on it, negatively impacting productivity overall.

Progressive Tax Rate
Yes because...

Progressive taxation should increase the total tax take. This means that increased funds are availa...

Progressive taxation should increase the total tax take. This means that increased funds are available for spending on worthwhile socially beneficial programmes, such as education, health, environmental protection, etc.
No because...
Progressive taxation is an inefficient way to increase the tax take. Because of resentment, increased evasion, reduced incentive to work and administrative complexities, a progressive tax rate can actually lessen rather than increase the total tax take. This is in nobody’s fiscal interest regardless of whether they favour small or large amounts of taxpayer-funded spending, since it equates to a more demanding system producing less agreeable results.

Progressive Tax Rate
Yes because...

Progressive taxation acts as a discouragement to overinflated wages. There is a decreasing marginal ...

Progressive taxation acts as a discouragement to overinflated wages. There is a decreasing marginal benefit to high, or higher, wages, since the earner will see less and less of the extra gross pay actually appearing in their net pay packet. Therefore, the upward pressure on pay will reduce and excessive remuneration will become less common.
No because...
It is not the role of government to use tax policy to determine an acceptable wage. Wages are a reward for work done which are largely a private matter between the employer and employee. Therefore, government has no legitimate interest in using a prohibitively high marginal tax rate to discourage high incomes.


3
Continue the Debate - Leave a Comment

2 Comment threads
1 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
3 Comment authors
  Subscribe  
Notify of
Alexander Landergan

Taking the same amount of money from both the rich and the poor has an unequal effect. 5% of a very rich person’s income will not mean they lose ability to purchase necessary goods (e.g food or heating) but doing this to someone on a low income may well do so- people having to choose between heating the house and feeding the kids? In a modern country? A flat tax system HURTS those on low incomes but a progressive tax system lets the same people live more decently, even if a few rich people get irritated.
A progressive tax system is about community.

Ravis

They are rich because they work for it. Hey, I work more so I will get less pay than I should because I am rich. Where’s the underlying motto of hard work=Fruit. Taxpayer funded welfare schemes never benefit the rich. It’s like I work so hard so that my money can be used to bring the poor up to my level with them doing less work than me. You want to say that poor people can get free money even if rich are losing their hard work.

Category: