Flat Tax Vs Progressive Tax In The USA

A flat tax refers to a concept that, under normal circumstances, would be criticized as it increases the inequality in society resulting in various socio-economic problems. In case of flat tax, citizens are expected to pay the same rate of tax; in present monetary value, it takes out more money from the poor to give to the economy. A progressive tax system is the opposite which claims to raise the rate of your tax as your income speeds up, taking away a larger proportion of higher income for equality in the society.

United States of America is known to be the world's largest national economy. With that, the first delusion comes about by thinking about prosperity in the region; that would be true if the United States were to adopt a fair progressive tax system. The prevailing number of Billionaires is 2089 worldwide with USA peaking the hit list; 537 of them are from United States of America. The unemployment rate has witnessed decrease however the decline has not been substantial provoking the fact that the equation of tax needs to be balanced.

Despite the obvious statistics proving a biased equation in terms of taxation, people like Tim Worstall are eager to prove the contrary. The purpose of a progressive tax system is to increase the taxes of the high income earners to a level where you may sustain the economy by eradicating the gap between the rich and the poor. In monetary terms, if we take a look at the effective income tax rate of 22.8%, it may be wise to conclude that USA is a progressive tax economy. Explaining the tax statistics, Dylan Mathews was able to explain that although on paper the United States is into a progressive tax system, but this system works in a much milder fashion than what is expected out of it. Being unable to account for payroll, state and local taxes, the regressive tax codes are actually responsible to bring down the effectiveness of the progressive tax system.

Which tax system does USA follow? Without a doubt USA lies under the progressive tax bracket however in order to achieve the positives of this system, the government needs to take vigorous steps and gear up to amend the rates further, only then will USA be in a position to say that it has derived true value out of its taxation system.

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