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Flat tax problems9/23/2023 In this case, the tax affects economic activity by altering people's incentives to work or not to work (leisure).Īt its core, the current federal income tax structure is a system built on progressive tax rates, which means that the more money you make, the higher your tax rate. A tax wedge also results from a tax on income. A sales tax, for instance, creates a "wedge" between the price a consumer pays for a good and the price the seller receives. From an economic point of view, however, most taxes introduce distortions in an economy. Some form of tax collection apparatus is necessary to fund the myriad governmental entities and the responsibilities they are charged with. Most of the proposals put forth are not only a significant departure from the current framework, but, in many cases, also differ markedly from each other. It also appears that a large number of Americans and their political representatives concur with this assessment given the large number of tax reform proposals advanced recently. ![]() ![]() There seems to be a general consensus among economists that the existing federal income tax structure in the United States: 1) is complex 2) hobbles economic growth by creating disincentives to save and invest and 3) creates a substantial compliance cost burden for individuals and businesses. The income tax has made more liars out of the American people than golf has.
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