Progressive Tax

Greetings! Thanks for starting this debate. To begin, I will point out a number of places where we agree. 1. Con: “Taking money from the rich, doesnt mean the Federal Government will give it to the poor.” Pro: True. The government may use tax money from high-income taxpayers for many expenses other than payments to the poor. For example, the US Air Force buys F-16 fighter jet from Lockheed Martin.[i] However, I fail to see why this point suggests a progressive tax is wrong. A progressive tax is a system in which tax percentage increases as income increases.[ii] In other words, the system shifts a greater share of the burden of taxation to higher income taxpayers. Hence, whether a progressive tax is acceptable depends on whether increasing the tax percentage for higher income taxpayers is acceptable. Where that tax money goes afterward seems to me to be a different issue than whether increasing tax percentages for higher income groups is acceptable. Please feel free to elaborate, as I am not seeing what your point’s relevance is. 2. Con: “People work hard for their money, whether you agree or not.” Pro: True. I do agree, generally. While I am not sure Paris Hilton has to work as hard at making money as most people do, I do not really have a concern with this statement. Again, however, I do not see its relevance to whether a progressive tax system is acceptable. 3. Con: “There are plenty of poor people who worked hard, and are now rich.” Pro: True. I again do not see the relevance to our issue. Next, I want to address the important threshold question that you helpfully pointed out: “And define rich? and define poor? What makes a person poor, or what makes a person rich?” To avoid being sidetracked by this question, which could be its own debate, I suggest we consider the IRS system for defining who is rich and who is poor. That system uses six increasing income tax percentages, with each applying over a particular income range.[iii] Under the 2015 tax brackets, for example, an individual who earned $10,225 would pay 10% on the first $9,225 and 15% for the next $1,000. The total tax in this example would be $1,072.50. You could certainly have an entire debate about whether this system correctly defines who is poor and who is rich. However, if we are going to get anywhere in the debate at hand, we might want to focus on whether the increase in tax percentages for the higher income brackets is acceptable, not whether the bracket ranges are correctly defined. You raise a very good question, but it is potentially complex enough to warrant its own separate debate. Finally, I want to start explaining the pro position for having a progressive tax system. I will be using the U.S. system as an example. First, let us see what the effect of a flat tax percentage system might be for a particular individual. To simplify, I am avoiding considerations for the moment like the earned income tax credit and am focusing just on the tax bracket percentages and taxable income. The IRS has reported that the total of all taxable income reported in 2012 was $6,246,314,009,000. The total income tax was $1,188,027,223,000.[iv] If everyone paid the same income tax percentages, collecting that total income tax from that total income would require an income tax rate of approximately 19% (total income income/total taxable income). In the example of the individual with an income of $10,225, the total tax would be $1,942.75 instead of the current $1,072.50, which is an increase of $870.25. The problem with increasing the tax by $870.25 on someone who only makes $10,225 per year is that such an individual would have a difficult time paying that additional amount while still paying for the basic necessities of life. The basic living expenses for an individual living in Grand Rapids, Michigan, for example, amounts to 15,876 per year.[v] The principle reason for using a progressive tax rate is a recognition that those individuals with lower incomes have less ability to pay than those with higher incomes. A flat tax fails to address the point that a 19% tax rate would be harder on someone who earns $10,225 per year than someone who earns $100,000 per year. This is probably a good start for now. I look forward to your reply. [i] http://www.mcclatchydc.com... [ii] http://apps.irs.gov... [iii] http://www.forbes.com... [iv] http://www.irs.gov... [v] http://livingwage.mit.edu...