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The 101 Behind The Flat Tax Debate


One of the busiest times of the year is around the corner…tax season. Since the 16th Amendment was established in 1913, Americans have been paying a Federal Income Tax to the government every year. The tax is a bracketed system to where the more money an individual makes, the higher percentage of tax they have to pay. These percentages range anywhere from 10-40 percent. However, there may be a change on the horizon. The idea of a Flat Tax is nothing new, but the debate over this system has become increasingly more popular.

The Progressive Tax, which is currently emplaced, promotes income equality. With a range of tax brackets, it creates high revenues for the federal government. Yet, the Progressive or Graduated Tax is extremely complicated. Accountants study for years on end to understand the 7 million word tax code. With all of the different loopholes, write-offs, and deductions, it takes hours to do someones taxes.

Opponents of the Graduated Tax believe that it is unfair for someone who excels monetarily to be discouraged by paying higher taxes. The Flat Tax is a tax where everyone pays the same percentage. For example, lets say a Flat tax was implemented at 20%. Whether you make $20,000 a year or $2,000,000, you have to pay the same flat tax of 20%. The only difference is that the person making $2,000,000 has to pay $400,000 in taxes and the person making $20,000 has to pay $4,000 in taxes. Many preach that this promotes fairness.

The Flat Tax would take minutes to complete. You would no longer need to find loopholes, deductions, or write-offs because tax brackets aren’t in place. The system also allows the country to compete in global markets. Whereas before, companies were moving out of country to dodge high taxes, they will now stay domestic and increase employment.

But there are negative externalities if the Flat tax is ever implemented. Accountants and the IRS would start to dismantle because a business or household would just receive a postcard with instructions annually. The Flat Tax is also said to discourage donations and philanthropy, with the graduated tax you would receive a tax write-off after donating.

The debate of a Graduated vs. Flat Tax has been going on for centuries. On both sides, the reasonings have both positive and negative effects on the economy and society.

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