In New Hampshire we have a progressive tax system where the tax rates are adjusted by the income individuals make. As we talked about in class, a progressive tax system benefits those who have a lower income and may not benefit those with a higher income because they are required to pay a higher tax rate. After learning about progressive and regressive tax systems in class, I thought it would be interesting to find out more about proportional tax which is an income tax system where the same percentage of tax is applied to all taxpayers no matter how much their income is. It is interesting to note that sales tax is also considered a type of proportional tax because all customers are paying the same rate on goods and services. Luckily, New Hampshire does not have a sales tax but we pay for this in other ways such as having high property taxes.
An example of proportional tax is when the rate is set at 20%. Someone earning $10,000 would pay $2,000 in taxes, someone earning $50,000 would pay $10,000, and someone earning $100,000,000 would pay $200,000 in taxes. I believe a proportional tax system is more fair than a regressive or progressive tax system because everyone is being taxed equally according to their income.
Of course there are still pros and cons of a proportional tax system. Technically, it is considered a regressive tax system because the rates don’t increase as the income amounts increase. Also, people who are against proportional tax feel as if those who have a higher income should be paying a higher tax rate than the lower class.
Below is a figure which compares regressive, progressive, and proportional taxes.