Is America's Tax System Fair?

One popular method of tax reform that some of the experts in this field think is worth considering is implementing a flat tax also known as a consumption tax. J. D. Foster says that “any tax with a single tax rate could be considered a flat tax.” An article from the website Tax Policy Center defines consumption as being “income less savings” (Gale). The major difference between an income tax and a consumption tax is the way savings are taxed. With an income tax all income is taxed when it is earned and again when interest is earned on any savings. Critics of an income tax say that this is double taxation and

Many Americans agree today that there should be higher taxes on the wealthy. Many surveys have been conducted to reveal the opinion of whether or not the rich should be taxed more. Many of the surveys equaled out with opinions and others, like one conducted in 2010, showed that 67 percent of Americans believe that the wealthy should pay more in social security tax. From another survey conducted a year later in 2011, Americans were asked whether the wealthy should be taxed more and the wealth redistributed, and results were split with 47 percent choosing redistribution and 49 percent disagreeing with the idea (Introduction to Should the Rich Pay Higher Taxes?,2). But “more than six and ten Americans think the United States benefits from having a class of rich people, which is an unchanging idea from 22 years ago” (Introduction to Should the Rich Pay Higher Taxes?, 2).

Stanford Professors Robert Hall and Alvin Rabushka initially established the concept of the flat tax system in December of 1981, under what they called a “postcard” tax in an article for The Wall Street Journal. In 1985, both Hall and Rabushka wrote The Flat Tax that was regarded as “The Flat-Tax Bible” by billionaire Steve Forbes. According to Andrei Grecu, “the proposal achieves simplicity, economic efficiency, and fairness- the traditional measures of effective taxation- while also collecting the revenues required to finance the government” (Grecu, 2004, pg. 10). The support for the flat-tax rate system grew amongst Republican lawmakers throughout the 1980s under the office of President Ronald Reagan, and continues to be supported by Republicans as an alternative to the current progressive tax system in place today. In addition, multiple Eastern European countries began adapting the concept in the late 20th/early 21st century.

Tax deductions, credits, special rates and homeowner deductions will allow the richest 20 percent of Americans to receive more than half of the $900 billion in tax benefits in 2013 (CBO). America does not treat all sources of earnings equally. Currently, the American tax code’s approach to income tax progressivity is focused on economic models in which labor is the only source of income. Since the upper class often accumulates large quantities of wealth through assets and capital, the tax code lacks progressivity. With the omission of the refundable earned income tax credit, the American tax code perpetuates inequality by offering tax benefits that solely benefit the

The middle class ($50,000-$99,999) paid 14.9 percent of individual taxes, while the poor class paid 0.1% of individual taxes. The 1%, rich class, paid more than the middle class and poor class combined, yet they aren’t paying their share in the eyes of so many. In 2011 the 1 percent, people who were making $100,000 and higher paid 23.8 % of the total tax liability and 9.1% in 2000. According to the National Tax Payer’s Union, in the tax year of 2014 the top 1% ($465,626 AGI) paid 39.48% of taxes, while the top 50 % -25% ($38,173-$77,713 AGI) paid 10.47%, and the bottom 50%(<$36,841 AGI) still paid the least with paying only 2.78% of

A progressive income tax system is what most countries have adopted for taxation purposes. It appears as if this is the most suitable method as rates increase more to those who can afford to pay them. As taxes continue to increase, more and more people start talking about viable options that would benefit bottom line taxpayers. An option that has been proposed by some is the idea of having a flat rate that in theory would eliminate the concept of inequality by taxing everyone and everything at the same rate.

Eliminating deductions, tax credits, and complex tax brackets also simplifies the tax code, making compliance easier.  (Tonya Moreno, CPA, no date) Some proponents of the flat tax would like to see the Federal Form 1040 replaced by a simple post card on which you write your wages and multiply it by one tax rate. I can agree with that! Why is it that our current tax plan has to be so difficult to understand? Another part of the flat tax philosophy is to remove double taxation, by only taxing earned income.   Things like dividends, interest on savings, or capital gains that result from investment or increases in asset value would not be taxed under a pure flat tax system. (Tonya Moreno, CPA, no date) Investopedia.com defines Flat tax as a system that applies the same tax rate to every taxpayer regardless of income bracket. A flat tax applies the same tax rate to all taxpayers, with no deductions or exemptions allowed. Flat tax system proposes that it would give taxpayers incentive to earn more because they would not be penalized with a higher tax bracket. If I know that I would take home my whole paycheck at the end of the week, I would not feel as bad when I spent a little more in stores because I know that I would still have a little extra cash to set aside. In addition, supporters argue that a flat tax system is

So imagine that you’re working really hard, and the glorious day has finally come. Pay day. Once you finally have that money and you have to pay taxes, you realize that you have to pay a lot more money towards taxes just because you work harder. This is why having a flat tax is necessary. Not only will it make taxing fair, but it will make it better for the economy. A recent poll in 2014 was asking whether Americans thought the government should switch to a flat tax. 62% of the people agreed to having a flat tax instead of a progressive, and only 33% do not want a flat tax (reason.com, 1). This clearly shows that the people want a flat tax because they know it will help the economy, be simpler than a progressive tax, and will be much more fair.

In a flat-rate system, all are equal in the eyes of wealth and what they owe the government meaning that everyone no matter their occupation would pay the same percentage of their annual income in taxes, creating a fair and just system. Therefore, there should be a change in the way that the United States does taxes. It should be changed to a flat tax rate, with a negotiable percent set at the beginning of each election, verses the current taxing tactic of the tax brackets.

Today, America’s tax system is an extremely complex system full of loopholes influenced by special interest groups and lobbyists crafted to benefit these interest groups to the furthest degree. But under a flat tax system, a fair, singe, unbiased percentage is taxed to all incomes for individuals and businesses. This one rate of taxation provides no room for loopholes due to the fact that deductions are removed and an individual’s income would be taxed entirely. The implementation of a flat tax system paired with a balanced federal budget would lay the foundation for economic growth and expansion for future years. This tax system would help to increase the economy at a stable, manageable rate by facing Americans fewer taxes, and more opportunities to save and invest. Despite many believing that a flat tax system was crafted to give tax breaks for the top 1%, it is an ideal system to reform our taxation system with because it would simplify our system drastically by removing deductions and loopholes, it would provide Americans with a fair system which would benefit all taxpayers with a tax cut, and finally America would

The current tax system employs a progressive tax rate, which means the percentage of income taxed rises with the amount earned. Currently, earners who made up to $8,375 paid ten percent while those who made more than $373,650 paid the top rate of 35 percent. Under the progressive tax system, a taxpayer pays a base rate on the first dollar earned and rates rise as earnings rise so that making more money means moving into a higher tax bracket. In a flat tax system, top earners pay more in dollars but pay at the same percentage rate. (Shlaes, 2015)

Although, a flat income tax rate is assumed to bring equality to income taxes, it holds a greater burden to the middle and lower class, than it does to the higher class. The flat tax rate would set an equal amount that everyone would be required to pay. It would ignore the difference between rich and poor taxpayers, which could be drastic. This would result in the middle and lower class possibly paying more and lose money for basic survival needs, such as housing and food. In America, progressive income tax rate is what we favor. It is the taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A lower tax is collected from taxpayers who earn less.

Many believe that the current tax system is biased. People exclusively have this feeling when being taxed based on their income. It is believed to be discriminating that the harder a person works and the higher their income, the more that person should be taxed. To fix this, the government has proposed a fair tax system in which they adjust the taxes so everyone pays an equal amount of taxes no matter the person’s income or economic status.

In theory, flat taxation seems like an equitable simplification of the existing tax system; however, significant downsides make implementation in the purest sense impractical in the United States.

The middle and lower classes suffer from the unfair tax rates. Studies show that people of the lower class often pay an average of eleven percent of his or her income to taxes. Those people in the middle class range pay around ten percent in taxes. The astonishing discovery is that on average, people in the upper one percent often only pay about six percent of their income to taxes. Through this, one can see that there is clearly something wrong with the way in which the government taxes American citizens. The current taxes put a strain on the lower classes; meanwhile, helping the upper classes increase their wealth.