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National Debt

Despite Claims, Progressive Income Tax Keeps Taxes Low

  • October 30, 2008

    With the campaigns winding down and a steady focus on the economy, the progressive income tax system that is used in the U.S. has come under fire recently as a form of socialism, a suddenly popular facet of discussion.

    While we live in a capitalist society in theory, much of our society runs on socialist principles or because of socialist programs. These principles and programs are so ingrained in our lives that we generally aren't even aware that they are "socialism" in work. Considering this, the socialist accusation is a fairly hollow claim that doesn't quite carry any meaning.

    The progressive income tax system, implemented in 1913 through the 16th amendment to the Constitution, by taxing higher earners at a higher rate, keeps taxes significantly lower for lower earners enabling them to maintain their ability to operate in a consumer society. For example, let's consider the following:

    Rate
    Income
    Tax
     
    35%
    $500,000
    $175,000
     
    25%
    $250,000
    $62,500
     
    15%
    $100,000
    $15,000
     
    5%
    $50,000
    $2,500
     
    $255,000
     
    28%
    $500,000
    $140,000
     
    28%
    $250,000
    $70,000
     
    28%
    $100,000
    $28,000
     
    28%
    $50,000
    $14,000
     
    $252,000

    Looking at the top half of the chart, you can see how under a progressive income tax the highest earners pay the most while the lowest earners pay significantly less. If we had an across-the-board tax that taxed everyone at the same rate, you can see from the bottom half of the chart that the lowest earners would pay almost SIX TIMES more than in a progressive income tax system in order to bring in the same amount of tax revenue. This would most likely drive many of the lower earners into restrictive economic positions reducing the amount of revenue brought in through taxes, and further raising taxes for those who were able to maintain their lifestyles.

    As the labels of socialist and socialism are thrown around and reviled by many of the talking heads (many of whom are in the top income brackets and want their taxes lowered through a flat tax), unless you, too, are in the top tax bracket, the progressive income tax is keeping a little to a lot more money in your pocket than a flat tax would, and prohibits our society from being ruled by a very small but very wealthy few.


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