Taxes - Progressive, Proportional, Regressive (pros & cons)

• EASY for everyone (payers & collectors) to understand…  1 rate for all!

• Proportional

• Regressive

• Progressive

• Pro

• Con

• Leads to less “leakage” - this is $ wealthy get out of paying b/c they can find loopholes in the code

• Proportional

• Regressive

• Progressive

• Pro

• Con

• Lg. sectors of economy (lower/middle classes) feel cheated… feel wealthier should pay more b/c they have more (wealthy don’t “feel” taxes the same)

• Proportional

• Regressive

• Progressive

• Pro

• Con

• The govt. earns less in revenue b/c the rate is kept so low to appease low/middle classes

• Proportional

• Regressive

• Progressive

• Pro

• Con

Creates an incentive for ppl to earn more $$, so they won’t pay as much in taxes

• Proportional

• Regressive

• Progressive

• Pro

• Con

Wealthy typically save more, so if taxes are lower wealthy can save even more.  This svgs is borrowed by others to make investments, which can lead to econ. growth

• Proportional

• Regressive

• Progressive

• Pro

• Con

Reduces “brain drain” as valuable, skilled workers stay in USA vs. finding a place to live where taxes are lower.

• Proportional

• Regressive

• Progressive

• Pro

• Con

System perpetuates (continues) inequality.  Hard for lower/middle classes to save if their taxes are higher.

• Proportional

• Regressive

• Progressive

• Pro

• Con

It can create political unrest.  When lg # of households see millionaires & corps paying little to no taxes and they are struggling to pay for basic necessities, people become outraged.

• Proportional

• Regressive

• Progressive

• Pro

• Con

• Reduces the burden on the poor - b/c they are required to pay less = higher disposable incomes (pay for goods & services)

• Proportional

• Regressive

• Progressive

• Pro

• Con