Chapter

Progressivity Can Live

in Fair Not Flat

Published by University of Chicago Press

Published in print April 2002 | ISBN: 9780226555607
Published online March 2013 | e-ISBN: 9780226555669 | DOI: http://dx.doi.org/10.7208/chicago/9780226555669.003.0006
Progressivity Can Live

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Unlike the common flat-tax plans that would raise taxes for the middle class in order to lower them for the rich, the Fair Not Flat Tax affirms America's historic commitment to a moderately progressive rate structure. Tax relies on varying rate brackets, it involves two distinct kinds of rates. One, a marginal rate, is the rate a taxpayer pays on her next dollar of income. Two, the average, or effective, tax rate comes from dividing the taxpayer's total tax by her total income. A tax system can be progressive, flat, or regressive. A progressive tax is one in which the rich pay a higher average rate than the not rich. A flat, or proportionate, tax is one in which everyone pays the same average rate. A regressive tax is one in which the rich pay a lower average rate than the not-rich. The current inconsistent income tax features progressive marginal rates. It is thus intended to be a progressive tax. The actual pattern of a tax system's progressivity depends on what sort of loopholes and gaps the tax has and on who can take advantage of them.

Keywords: flat-tax plans; regressive tax; progressive tax; marginal rates; America

Chapter.  6606 words.  Illustrated.

Subjects: Political Economy

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