That's a 'flat tax', and it is a regressive tax system. You are requiring the bottom end of the scale to pay a higher percentage of their discretionary income than a person at the higher end of the scale.
Hence the have graduated tax rates, which is supposed to be 'more fair'.
On top of that (sticking to income and payroll taxes as this example) the system is used to incentivise certain types of spending (house purchases, retirement investments, electric vehicles, purchasing health care, charitable donations). The tax system needs a severe re-write and simplification -- for instance, possibly eliminating the asymmetric taxation rates based on the source of income -- but there is no truly simple solution that maintains the same structural designs and flexibility.
(and this blissfully ignores the 'poverty line' which has more to do with politics than actual spending power, state/local level taxation, tax-free income, etc. Not to mention the issues with corporate taxes).
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Date: 2012-11-26 11:19 pm (UTC)Hence the have graduated tax rates, which is supposed to be 'more fair'.
On top of that (sticking to income and payroll taxes as this example) the system is used to incentivise certain types of spending (house purchases, retirement investments, electric vehicles, purchasing health care, charitable donations). The tax system needs a severe re-write and simplification -- for instance, possibly eliminating the asymmetric taxation rates based on the source of income -- but there is no truly simple solution that maintains the same structural designs and flexibility.
(and this blissfully ignores the 'poverty line' which has more to do with politics than actual spending power, state/local level taxation, tax-free income, etc. Not to mention the issues with corporate taxes).