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Tax inequality is a crisis affecting many countries. For that reason, there should be a way of balancing the budget without overtaxing the poor in the society. The low-income bracket spends a large portion of their pay on sales tax. Additionally, income taxes are not proportional to the amount of income generated.
As a result, the poor spend a larger percentage of their income on tax than the rich. However, the government needs taxes to provide basic services. Therefore, a fair tax regime is necessary for a country’s economic growth. This essay evaluates income and sales taxes in terms of tax equity.
Sales tax refers to the tax paid by a seller to a government for selling goods and services. Thereafter, this tax is transferred to consumers as part of the prices of goods and services. In most cases, tax inequality is brought about by over reliance on sales tax. As a result, the low-income bracket spends a large portion of their pay on excise or sales tax.
For instance, in Washington the low-income bracket spends 15.7 % of its income on sales tax. On the other hand, the rich spend 4.4% of their income on sales tax. This leaves the poor with little or no savings. Nonetheless, if sales tax is lowered, poor people will use the extra cash available to them for personal development.
Income tax is tax imposed on incomes. This refers to the deductions made on incomes and salaries. When all forms of taxes are taken in to consideration, poor people spend a larger percentage of their income on taxes than the rich. Therefore, a tax bracket should be created to cushion the poor from high income taxes. Additional, there should be different tax brackets for the merely well-off and the super rich.
These tax brackets will ensure basic fairness in taxing incomes. In this regard, those who have benefited most from the economy will have to pay more. However, those with identical incomes should pay equal taxes. On the other hand, those with varying incomes should pay different taxes.
If the inequality in the taxation system is to be brought to and end, there should be a means of shifting the corresponding tax burden. This is the only way tax equity can coexists with a government’s need to collect taxes for its revenue. This is because a government requires finances to implement its budget. Therefore, a reduction in sales tax should correspond with an increase in other forms of tax.
Likewise, a reduction in tax for the low- income bracket should correspond with an increase for the high- income bracket. Moreover, tax payment is evaluated using two principles. These principles include the ability to pay and the benefit. In this regard, taxes should be paid by those who benefit from them and those who have the capability to pay them. Therefore, fair taxation should not be contested.
In conclusion, it is agreeable that tax inequality is a debatable issue in many countries. However, governments should find ways of settling expenditures without shifting the burden to the poor. This is because the poor will be forced to spend a large portion of their pay on taxes. Nonetheless, a government requires taxes to provide basic services. Therefore, a fair tax regime is crucial for a country’s economic growth.
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