Flat Taxation

Flat Taxation

Claim of Fact essay on why a flat tax system is better for the economy

Flat Taxation

A flat tax system is a tax system that charges a constant tax rate to all income above the personal allowance. This system ensures that above a certain level, everyone remits an equal proportion of their total earnings in spite of how much it is. It discards the deductions theory and ensures that high income individuals are taxed accordingly. This tax system differs greatly from the conventional progressive tax system since similar rates are employed across all income categories instead of being conformed to different income classes.

Although a couple of economists have argued otherwise, the flat tax system no doubt delivers some undisputed benefits both long term and short term to the economy of the country of state applying it.

Unlike the progressive tax system which imposes hefty taxes in interest incomes, capital gain and dividends, flat tax systems encourage saving over consumption since their income is taxed only once at a flat rate. This aspect promotes a savings and investments culture in the community which in turn creates an indirect effect of public expenditure to boost the country’s key economic industries such as the service industry, housing market and automobile industry. A flat tax system also motivates individuals to work hard, earn much more money, diversify and increase

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