Our current tax system is referred to as a “progressive” tax. A progressive tax is a tax by which the tax rate increases as the taxable income increases. Progressive taxes attempt to reduce the tax burden of people with a lower ability-to-pay (those with less income), as they shift the burden increasingly to those with a higher ability-to-pay (those with more income).
A flat tax (short for flat rate tax) is a tax system with a constant tax rate. Usually the term flat tax refers to the taxes on household income (and sometimes corporate profits) being taxed at onerate, in contrast with progressive taxes that vary according to parameters such as income or usage levels.
- Which type of a tax system would you prefer – a progressive tax system or a flat tax system? Provide several reasons why you would prefer this type.
- What problems do you see with the current progressive tax system?
- What problems do you anticipate would exist with implementing a flat tax system?