Introduction to Taxes
Taxes are a levy placed on possessions or income in order to support the activities of the government. Taxes can be direct taxes, such as income tax or property tax; or they may be indirect taxes, such as those included within the price of an object.
Taxes are calculated by different means, which are constantly being adjusted in order to try to equalize the burden on the taxpayers, or conversely to ensure that the highest tax burden is placed upon those most able to pay. Some of the methods of calculating taxes in the United States for example include the flat tax, short for flat rate tax, which applies a percentage rate to all household or corporate income. Flat taxes can also be applied to consumption rather than income. In other words, similar to a sales tax so that you would be taxed on what you buy, not on what you earn. Most flat taxes whether implemented or proposed exclude households or corporations below a certain income level. Flat taxes are not usually implemented in countries with advanced economies, but in countries where they have been put in place, significant economic growth has occurred, following the implementation of the tax.
Graduated rate taxes are similar to flat rate taxes with lower income excluded in their simplest form. While the federal income tax in the United States is a progressive tax rate, five states have flat rate state taxes, four of which have a low income exclusion and one, Pennsylvania has a pure flat rate tax.
There is increasing interest in the flat rate tax proposals, with some presidential candidates, such as Steve Forbes, making the concept part of their platform. The exact terms and exclusions vary from candidate to candidate. Part of the interest in the flat tax is the perception that it would reduce an increasingly tax code in the United States. Those who are the wealthiest whether individuals or corporations are often able to pay the least amount of tax proportionately.
Another proposal which is arousing interest in the tax world is the negative taxes proposal. This is essentially a flat rate tax with exclusions with the added stipulation that if the exclusions result in an amount less than zero, instead of the taxpayer owing nothing, they would actually receive a check from the government for the negative amount. As might be expected, the negative tax proposal is roundly criticized as being welfare without the burden of looking for employment.
by Nathan.Smarty 19 years ago