Fairness In Taxes

Sahara Burton, Parris Collins, Brittany Yokely

Fairness: Ability-to-Pay V.S Benefits Received

• Ability to pay : You pay taxes based on what you can afford.

• Benefits received : people who use the goods/services should pay the taxes

Why do we need taxes?

• 1. government has expenses• Provide public goods• Redistribution of wealth • Promote employment, growth, stability• 2. government needs revenue to pay for

expenses• Government levies taxes (collects)

Tax structures • 1. tax structure determines how equally the tax is paid

by taxpayers• 2. there are three major tax structures• Progressive taxes• Regressive taxes• Proportional taxes• 3.A tax structure is applied to a tax base• Income• Wealth• Property• Goods/services

Progressive tax

• Tax rate increases as income increases.• Example : federal income tax• Falls under the ability to pay• Wealthier people pay both higher rates and

tax amounts

Regressive Tax

• Tax rate decreases as income increases ( affects poor more)

• It is the opposite affect of progressive tax• Tax on goods/services that are a major

portion of low income peoples budgets

Proportional Tax

• Tax rate is the same for everyone• Tax revenue will vary depending on the tax

base • Very simple and easy to understand

Key terms

• Tax base : the income, wealth, property, good or service that is being taxed

• Capital gains tax : tax on wealth. Such as interest, stocks . Mostly collected from high income people

• Property tax : a tax based on real estate and other property

Key terms cont..

• Sales tax : tax on goods/services that are sold• Excise/sin tax : high sales tax rates on alcohol,

tobacco, and gambling. Mostly collected from low income

• FICA tax : tax that all US workers must pay to fund social security/ Medicare and other retirement benefit programs. Is regressive tax since it is not paid on income earned over $100k