State and local governments also depend on fees and charges for services, which fall heavily on lower-income households, for 44 percent of their revenue. Property taxes are levied on homes, but rarely on other kinds of financial assets. The distribution of the property tax burden is not clear, but the family home is the primary financial asset for most middle-income households. Payroll taxes are moderately regressive because they fall on only wages and salaries and only up to a maximum of $106,800 in earnings. State and local income taxes range from flat to mildly progressive. Sales taxes are regressive-they take a higher share of low incomes than higher incomes. In 2007, these taxes provided 92 percent of federal income and 51 percent of state and local government income. ![]() ![]() tax system consists mainly of taxes on income (personal and corporate), payroll (Social Security), sales, and property. ![]() Adam Smith, to whom economists always turn to for economic wisdom, observed, "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion." The current U.S. Second, there's no concealing that the flat tax would radically redistribute the tax burden.
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