ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Fair Taxation: Is it possible? What's Fair and Equitable?

Updated on June 6, 2017
Source

The issue of taxation is something that will always be contentious among society - I doubt there will ever be a time when a tax is consider fair and equitable by all inhabitants of society. There will always be people who pay too little tax while others pay too much, especially when the tax code is as convoluted as it is in America today. In this article I'd like to explore some of the arguments in support of and against the current tax system while also looking at several initiatives being proposed to replace the current tax code.

Progressive Taxation

A progressive income tax is considered fair by some segments of society. Usually, individuals with lower incomes are in support of this type of taxation because it reduces income inequality in a society by place more of the tax burden on individuals making more money. Essentially, the people who make more money have to pay more money in taxes. The rationale is that people with more money tend to use more resources and so they therefore they should have to "pay more for their impacts." In addition to this, it's often argued that those who make more should help society improve by supporting the lower income workers.

Of course the richer people say this is unfair and that a progressive tax structure is essentially another term for "class welfare." In other words, the argument is that higher taxes on the rich usually go to social programs that are really only of benefit the less fortunate (a form of wealth redistribution).

Taxation Definitions

Progressive Tax - This form of taxation is where the tax rate increases as your taxable income increases.

Flat Tax - This form of taxation is where the tax rate remains constant and is not dependant on taxable income.

Luxury Tax - This form of taxation places sales, transaction, or business taxes on goods and services that are considered non-essential.

Sales Tax - This form of taxation places a tax on the sale of a good or service to the consumer.

No matter which side of the fence you are one with regards to the progressive tax, you have to recognize that the current American Tax Code is complete mess. You practically need a college degree to understand it! In addition to being burdensome and complex its riddled with conflicting information, loopholes, and is constantly changed by politicians wishing to cater to special interest groups.

Flat Taxation

The other side of the coin is the argument for a flat tax. One segment of society would argue that a flat tax is the fairest and most equitable form of taxation because each working individual would have to pay the same percentage of tax regardless of their level of income or their situation in life (assuming a true flat tax with no deductions). Another great thing about a flat tax is a simplified tax code. Many people who want to change the tax laws in America are in support of a flat tax.

On the surface this does seem quite fair but can be considered unfair by some segments of society. The argument is that the proportion of lower income individual's earnings that goes to necessities and taxes would be much higher than that of someone who's earnings are much greater. For example, a worker in a flat tax society who makes $25,000 annually might pay up to 90% of their income on the necessities of life plus taxes. However, a worker making $50,000 annually would only pay 45% of their income for the same standard of living. This can lead to a differential in the standard of living among people with varying income levels that is greater in a flat tax society than in a progressive tax society. In addition to this, individuals who don't work won't pay any income tax (as they do now), which is sometimes seen as an incentive not to work.

Personally, I consider the arguments against the flat to be weak and that a true flat tax with no deductions would be actually be quite fair.

Source

Fair Taxation Initiatives - National Sales Tax

Did you know that there are other ways to tax citizens that may be more fair than progressive or flat taxes? In fact, there are several proposals out there to fund the government that would likely be considered more fair than what the United States currently has on the books. One such big initiative is a proposal to pass a national sales tax to replace the current progressive tax system.

According to FairTax.org, the proposal would eliminate the income tax, abolish the IRS, and institute a national sales tax. The proposed FairTax is a single-rate (23%), federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. If passed, the FairTax proposal would put more money in your pocket and would give you the power to choose how much tax you want to pay. The less retail products and services you consume, the less you pay in taxes! Furthermore, you wouldn't have to file an annual tax return, use complicated software, or hire a "tax expert" to help you reduce your tax liability and file your paperwork. Tax fraud (and tax ID Theft) would nearly disappear and government bureaucracy would be decreased.

Is Taxation Right?

If a progressive, flat, or national sales tax is approved by the dominant decision making authority in a society then it is legal taxation. It would also most likely be considered ethical as tax money is used to support the common goals of society, so long as the taxes aren't too high. What constitutes "high taxes" is a another source of conflict better left for another discussion.

Taxation (whether progressive, flat, or sales) is also a forced action. Although it's necessary for society to function, most people would rather not pay any taxes if it were possible - this is true regardless of the fact that people generally recognize the societal benefits of paying taxes. It must be noted here that the consequences for not paying your taxes can be severe, so there really isn't an option to not paying.

What's Fair?

As you can see, what constitutes a "fair" tax is actually a matter of perspective and opinion. For every form of taxation, there are at least two opposing sides that are either in support of or against it. As you have seen, the many facets to taxation make it difficult to agree on how best to fund the government. Although I hope that one day we will see our current tax system abolished and replaced with something more fair, I am not optimistic that change will occur during my lifetime.

What Form of Taxation do you Favor?

See results

What Do You Think?

What's your opinion on the subject of taxation? Do you think that the United States has it right or should we replace it with a flat tax or national sales tax? Let me know in the comments sections below.

Comments

    0 of 8192 characters used
    Post Comment

    • CWanamaker profile imageAUTHOR

      CWanamaker 

      17 months ago from Arizona

      Hello Dick,

      Thanks for the reference I will check it out. Consumption based taxes are a great way to give more control to the consumer on how much tax they pay. The more stuff they buy the more tax they pay!

    • profile image

      Dick 

      17 months ago

      Read the federalist paper #21. Hamilton said, "A tax on consumption can be compared to a fluid which will seek its own level with means of paying it. The rich can be extravagant and the poor can be frugal. The individual can avoid oppression by simply paying attention to his own resources."

    • bradmasterOCcal profile image

      Brad Masters 

      2 years ago from Orange County California BSIT BSL JD

      I support the NST, but I think that 23% is an overkill. FICA should be taken out of payroll and not sales tax.

      The feds also need to reduce spending, and try to balance the budget, as opposed to just increasing the money supply.

    • bankscottage profile image

      bankscottage 

      3 years ago from Pennsylvania

      Nice Hub. The current system of taxation certainly isn't "Fair". Everyone should have some skin in the game and pay at least something toward the cost of the government. Too many people (47%?) pay nothing and many actually get money back. Money someone else paid in.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)