Neighborhood Ministries

While some say that is not fair because the rich pay more, they are better able to afford it. There are certain drawbacks to the graduated tax. It does create an incentive to reduce taxable income to stay in a lower tax bracket. If someone earns too much, it will put him in a higher tax bracket at a higher tax rate. How much of that is done is hard to estimate. The problem comes with the deductions. There is no problem with the standard deduction because poor people can’t afford taxes  on what little they get though setting the amount of deduction is tricky. Too much and a lot of people can get out of paying taxes, too little and it makes it hard on the working poor who don’t make enough to live on. The real problem comes with deductions. Our system has become so complex many people need professional tax preparers to fill them out and that is costly. While there is no problem with deductions for necessary expenses, it can be abused by throwing  in all kinds of non-related expenses. Having a party with friends would not qualify if it is not related to the business. There are also incentives to encourage things like charitable giving. Incentives encourage people to put money in certain purchases or activities. A certain amount of giving is assumed though that may not actually take place. Certain types of income are also exempt from taxes. The rich have money to do so while the poor do not. Smart people with money can put money in tax shelters and may pay less than lower income people who can’t afford shelters. Exemptions and deductions seek to balance the tax burden but may make it worse if not properly set up.              While some call for a straight tax, I don’t think they would get much support. .