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There is one inherent complication involved with a graduated rate. If there is a single rate for everyone without loopholes, then companies can pay income taxe
by xiaoma 17y ago
There is one inherent complication involved with a graduated rate. If there is a single rate for everyone without loopholes, then companies can pay income taxes as a percentage of their total payroll, instead of calculating individually for each person. In fact, there would be no reason for a non-self employed person to need to calculate anything at all. If X is the tax rate, then the employer just withholds a X percent from every single paycheck given to any employee. This sort of system would make it much harder for the government to encourage various behaviors without resorting to a direct subsidy, but it would redirect a lot of people from the tax preparation industry into productive work.
If the rate is graduated, then there is no way to know the total amount of income tax owed by a company's employees without doing separate calculations for each.
BTW, the US, UK, and every other supposedly "progressive" tax system I know of actually taxes the rich less, due to complex tax systems that only those who can afford accountants can properly exploit. On a percentage basis, the very wealthy have a much lower tax burden than the middle class under the current system.
- bps4484 17y agoI think the key phrase in this post, and what other commenters seem to be missing, and what the hard part of making any changes will be, is "without loopholes". That is the reason the tax code is hard. It's also a small reason(1) wealthy people can manipulate the tax code to their advantage. I don't think it has anything to do with a graduated rate. Granted, a flat tax would allow employers to pay the tax and employees wouldn't have to file taxes, but if there were no loopholes in our current graduated tax system, the government could provide an online form that could have you fill out your taxes in < 5 minutes. (1) I said a small way because if we really want to get the super wealthy to pay more in taxes, a big way could change things is by making capital gains count as income. This is the reason someone like warren buffet pays 17% of his 46 million income, because it's all capital gains taxed at 15% (http://www.timesonline.co.uk/tol/money/tax/article1996735.ece http://www.timesonline.co.uk/tol/money/tax/article1996735.ec...). I would be interested in seeing stats how most of the super wealthy (top .1%) make their money, but I would bet it's almost all capital gains.