Proportional And Regressive Taxes example essay topic

352 words
Advanced Placement Microeconomics Chapter 31: Public Choice Theory & Taxation Part II (Pgs. 650-660) Apportioning the Tax Burden: I Benefits Received vs. Ability-To-Pay Benefits Received Principle of taxation asserts that households and business should purchase the goods and services of government in the same way they buy other commodities. Those who benefit from the government's goods and services should pay the taxes necessary to finance them. Ex.) If Talley drove on Route 287 to work everyday, she should be the one paying for the road's service and maintenance costs.

Be warned of the problems; government has no way of determining the benefits each individual household and business receive from defense, education and local police. Also, this principle cannot be logically applied to income redistribution programs. Ability-To-Pay Principle of taxation asserts that the tax burden should be apportioned according to taxpayers income and wealth. So this means that homes with larger incomes and bigger businesses would have to pay more taxes both absolutely and relatively than those with smaller incomes.

Big Problem: There is no scientific way of measuring someone's ability to pay taxes. Apportioning the Tax Burden: II Progressive, Proportional, and Regressive Taxes Progressive Taxes the average rate increases as income increases. Such a tax claims not only a larger absolute (dollar) amount but also a larger percentage of income as income increases. Ex.) Income and most types of Federal & State Taxes Regressive Taxes the average rate decreases as income increases. Such a tax takes a smaller proportion of income as income increases. A regressive tax may or may not take a larger absolute amount of income as income increases.

Ex.) State Sales Tax Proportional Taxes the average rate remains the same regardless of size of income. Most taxes are either progressive or regressive; there are not that many proportional. This is since many taxes such as the Sales Taxes that seem to be proportional are truly regressive + Examples of Progressive, Proportional and Regressive Taxes can be found on pgs. 651 & 652.