Case Study: United States Taxation System

Good Essays
Question 1
If a friend of mine told me that he does not want to take a job that pays more money because he would end up taking less income due to taxes, I would advise him to accept the job offer. I would tell him that because being bumped into the next tax bracket would not have any negative effect on his income. It would happen due to the fact that The U.S Tax Code had been written to be Marginal, what means that one’s income would not be subject to reduction after tax just because they earn more money. When the Tax Code was created legislators were aware of people getting new jobs with higher incomes, and being subject to the next tax bracket. As a consequence, legislators presented the Marginal Tax (Romer).
Marginal tax is a taxation rate
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It means people with low-income pay higher percentage of taxes. Following, The Progressive Tax system, in which the tax rate increases as the percentage of income increases. It means people with higher income pay a higher percentage of tax according to their earnings. Finally, The Flat Tax system, in which everyone pays the same percentage of tax not considering their earnings (Video Engager).
Tax sales are considered regressive due to the fact that the population considered as the low economic class or low-income people expend most of their earnings on goods and services. For that specific reason, a vast percentage of their earnings is taxed. It is accurate to say that sales taxes remain equal no matter people’s income or level of taxation (John). As an example, an individual that earns $5000 and spend $500 on groceries. $500 would be 10% of their income on goods. However, for an individual that earns $5 million, it would be only
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As a positive effect on economic activities, the government can act as a preventer of monopoly in the market (FIELD). It means that the government can regulate monopolies giving a certain protection to customer’s interest. It is done through regulatory procedures performed in order to adjust prices according to a set average or marginal cost. These procedures were created to guarantee fair prices on goods and services, to encourage social-economic justice, as well as to ensure commercial and environmental safety. As a negative effect on economic activities, corporations may find regulatory interventions too severe ending up affecting companies’ work efficiency and quality of service. An increasing in government regulation means a higher workload and consequently, more time and effort for a company to adapt. It can be detrimental to a company, causing tumults in the stock market and general instability

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