What Is Considered a Fair Tax Rate for Income?

Defining “fair” in the context of tax rates is inherently subjective. In this article, we will explore different perspectives and delve into the implications of various tax rates for ensuring a balanced economy and a fair society.

Flat Tax Rates: A Simple Solution?

After studying taxation in college, I firmly believe that a flat tax rate of 10 to 20 percent on all income would cover essential government expenditures, such as military funding. A flat tax system simplifies the tax code and reduces administrative costs associated with tax collection. However, this approach raises questions about its fairness and adequacy, especially for lower and middle-income earners.

Justification of Necessary Expenditures

The justification for any government expenditure lies in its necessity. Any funds exceeding what is needed for essential services should be avoided. It's a common debate that whether an income of $100 million should be taxed at 90 percent, given that $10 million is sufficient. This perspective ignores two critical factors:

Investment and Capital Formation: Wealthy individuals typically do not hoard their excess income. Instead, they invest it, which fuels the creation, expansion, and improvement of businesses. This capital also supports affordable mortgages, benefiting a wide range of consumers, from homeowners to welfare recipients. Spending and Economic Benefits: Spending by wealthy individuals boosts the economy, benefiting those involved in any way, seamless down to those receiving government assistance. Redirecting this wealth to politicians often leads to mismanagement, as the private sector is generally better equipped to handle such resources.

Personally, I gratitude every millionaire and billionaire who, through their investments and spending, have created job opportunities that contributed to my education and retirement. This has also provided me with ample time to volunteer and contribute positively to society.

Historical Context and Tax Brackets

During a time when the United States enjoyed the highest Quality of Life in the world, the top tax brackets paid up to 94 percent. This period also saw a robust middle class, comprising 66 percent of the population. Since the shift towards Welfare for the Rich through the implementation of Trickle Down Economics, the middle class has significantly declined to just under 45 percent.

During this era, the rich could claim tax deductions for investing in American-made goods and paying American labor living wages. However, under Reagan's policies, these deductions were eliminated, further exacerbating income inequality. Conservatives argue that Free Markets and Supply-Side Economics create wealth and boost economic growth, yet historical data and practical experiences suggest otherwise.

The Reality of Tax Rates

Tax rates depend on the income amount. For extremely high compensation packages of $100 million, a tax rate of 90 percent on the excess of $10 million is reasonable. After all, how much does any individual really need? Life is still exceptionally comfortable on a few hundred thousand dollars.

The oft-cited ideology that Free Markets and Supply-Side Economics work and make everyone rich is a simplification that often fails to address the systemic issues and marginalized populations. These economic philosophies have consistently shown that they prioritize the interests of a few at the expense of the majority.

In conclusion, the concept of a "fair" tax rate remains a matter of perspective. While a flat tax rate simplifies the system, it may not be equitably distributed. Historical evidence and contemporary experiences suggest the need for a more nuanced approach to taxation that addresses income inequality and promotes a balanced economy.