Is a progressive tax more fair than a flat tax?

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April 2015
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Progressive taxation versus flat taxation inspires ongoing debate, and both have proponents and critics. In the United States, the historical favorite is the progressive tax. Progressive tax systems have tiered tax rates that charge higher income individuals higher percentages of their income and offer the lowest rates to those with the lowest incomes. Flat tax plans generally assign one tax rate to all taxpayers. No one pays more or less than anyone else under a flat tax system. Both of these systems may be considered "fair" in the sense that they are consistent and apply a rational approach to taxation. They differ, however, in their treatment of wealth, and each system may be called "unfair" according to who benefits or is treated differently.

Supporters of the progressive system claim that higher salaries enable affluent people to pay higher taxes and that this is the fairest system because it lessens the tax burden of the poor. Since the poor have the smallest disposable incomes and spend a higher proportion of their money on basic survival needs, such as housing, this system allows them to keep more of their money. Affluent taxpayers are better able to provide for their physical needs and therefore are charged more. A flat tax would ignore the differences between rich and poor taxpayers. Some argue that flat taxes are unfair for this reason. Progressive taxes, however, treat the rich and poor differently, which is also unfair.

Flat tax has one tax rate. Everyone carries the same responsibility, and no one is unequally burdened, rich or poor. Taxes do not discourage high earners from earning more, and the low tax rate encourages the poor to strive to earn more. This reduces the potential deadweight loss of taxation and encourages good work ethics. This system does, however, risk taking too much money away from the poorest citizens.

Both tax policies have significant advantages and disadvantages that may prevent them from perfect fairness.

October 2016