Progressive tax is a case whereby the charge of tax increases with the rise in taxable amount. Progressive is used to explain an impact of distribution on expenses or income, detailing the development of the rate from low to high, whereby the average tax rate is lower compared to the marginal tax rate. Besides, it applies to an entire tax system or individual taxes. It decreases the prevalence of people with lower payment abilities and is progressively transferred to those with enhanced disbursement abilities. The concept of tax progressivity is often used in personal income taxes whereby people with higher incomes are required to pay higher amounts of tax, compared to those with lower incomes (Burton and Shelton, 215).
Tax progressivity is applied in the way tax credits and tax exemptions are utilized to generate allotment effects and are considered to be part of the entire system. Some tax systems in many countries give people the opportunity of decreasing taxable income through individual allowances and specific non-business expenses made up of state and local taxes, medical expenditure and interest on mortgage. Tax progressivity systems may impact the creation of revenue for a country or decrease the need for temporary support. The phrase Average Tax Rate Progressivity is applied in reference to change in the rate of average tax, relative to a change around the median income of a given state (Causon 297-307).
The establishment of a tax system by any government is a procedure that is often complex, however, there are efforts and alterations that are usually proposed. The proposals, choices and conclusions that are formulated by the tax system implementation specialists are immensely affected by government outlay processes, financial and the monetary factors, societal or legal and cultural factors. Taxation policies are of great significance in the fulfillment of long and short term aims of any country. Other aspects that governments should also consider in the process of inventing taxation laws include Tax simplification. This is where the government is required to simplify the taxation laws, law pages and systems in order to make it easier for the public to understand them. This is of importance since the aims formulated by the government towards the achievement of taxation system will be simplified.
It is essential to note tax conformity of the citizens during the process of initiating a tax system. The system should give citizens the opportunity of maximizing their personal utility and interacting with others in ways that are in line with the rules and norms. The external environment impacts the approach and implementation of the tax system. The theory of the second best can be applied in researching on the issues to be included in the taxation system. It helps in the establishment of peripheral aspects with regards to the system. For example, taxes should be imposed on counteract impacts like pollution and this can only be ideal if these can influence the costs towards providing a faulty signal on the full cost of the output. They should be in compliance with the tax system without the need for heavy-handed enforcements from the state (Birskyte 78).
Tax optimization is yet another aspect to be looked into since there is need for systems that consider both the needs of an efficient economy and being fair to all those who pay taxes. The system should be able to increase the revenue of the government, towards the achievement of social and economic policies. Another aspect is economic criterion, whereby it should be considered whether the tax will have an impact on economic efficiency through the allocation of resources. Issues of equity are also looked into considering that unfair taxes to the taxpayers are not easy to implement. Identification of risk is important because the tax environment is constantly undergoing changes, whereby the future is not based on the past and international trends are referred to in the identification of changes and areas of risk. Monitoring and evaluation of performance strategies against plan should also be put into consideration in the process of creating a tax system (Birskyte 78).
The United States government enforces taxes on Medicare and social security. Retail sellers and buyers are required to pay taxes, whereby he sellers collect the tax and forward to the government. There are also other enforcement services like hotel rental taxes and admittance tickets, which are usually in an even amount on a daily basis (Pre-Budget Report 62). There are taxes that are levied on merchandise imports to the United States but does not apply to awards presented to the state and goods brought into the country by tourists. Telecommunication services, labor provided for the assembling or maintenance of personal property, commercial parking and maintenance or warranty of items are among the services that are taxed by the US government. Besides, the government also taxes photo processing, books, magazines, phone cards and prepared foods. These taxes are imposed by the government because it believes that it is healthy both socially and economically. Payment of taxes is a personal responsibility for the returns of every citizen and the evasion of taxes usually have dire penalties. The deductions in form of taxes are used in supporting work, home ownership (through deduction of mortgage interest), saving for retirement, military adventures, welfare programs, bureaus funding, agencies, subsidies and global empire (Budget Report 28).
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