![]() But the idea has not taken off federally. Under the new tax brackets approved by Massachusetts voters last year, for example, most families will pay a marginal income tax rate of 5 percent while wealthy families will pay that 5 percent rate on their first million dollars of taxable income and see anything over a million dollars taxed at 9 percent instead.Ī desire to transition away from this system and toward one more favorable to the wealthy has long had proponents-most prominently Steve Forbes during his third-party presidential runs in the 1990s. Under a graduated tax, different portions of one’s income can be taxed at different rates, with high-income families seeing more of their income taxed at higher rates than other families. Much of the progressivity in federal and state income tax law comes from graduated rate structures. ![]() Income taxes offer an important counterbalance as they tend to be progressive, which means that they ask more of families with a greater ability to pay. Most taxes levied by state and local governments are regressive, meaning that they charge higher rates, relative to income, for low- and middle-income taxpayers than for wealthy families. Critically, a flat tax guarantees that wealthy families’ totalstate and local tax bill will be a lower share of their income than that paid by families of more modest means. Flat taxes have some surface appeal but come with significant disadvantages. ![]() In short: A flat tax is one where each taxpayer pays the same percentage of their income whereas a graduated tax applies higher rates to higher incomes. ![]() ![]() What’s the difference? And are states well served by the transition? While most states have a graduated rate income tax, some state lawmakers have recently become enamored with the idea of moving toward flat rate taxes instead. ![]()
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