Question 1
The tax rate, in any taxation system, refers to the ratio according to which a person or business is taxed. There are several methods in which the tax rate can be presented, and one of these is the marginal tax rate, which can be described as the tax rate that demands that an individual should pay a specified amount for every additional dollar of income (Miller and Selden, 2013). It is, therefore, the tax percentage that is accorded to the last dollar that an individual earns. In 2013, the United States of America recorded a marginal federal income tax rate of 39.6 percent, which was the highest recorded at the time. The rate applied to earnings that summed over four hundred thousand dollars. Therefore, it can be deduced that in that year, all the gains over four hundred thousand dollars accrued a lower tax rate of about 33 percent.
Every society endeavors to achieve equality for its members where everyone has access to resources. For taxation, the best way of achieving this equality is by utilizing marginal tax rates. It is a method that endeavors to create a situation where the people who have little are not taxed more than those that have a lot more (Miller and Selden, 2013). Marginal tax rate system endeavors to tax individuals fairly where low-income earners are taxed at a rate lower than higher income earners. The taxpayers are broken down into ranges or brackets which are used to determine the tax rate that is to be applied to their taxable incomes. With marginal tax rate, as the income increases, so does the tax rate applied so that the previous dollar is taxed less than the next one earned. Therefore, the significance of this type of tax rate is not to impose on the citizens, but to promote a sense of equality.
Question 2
A regressive tax is one that takes up a larger income percentage from low-income earners than it takes from high-income earners. In a country that seeks proper utilization of its resources so that its members can all benefit equally, there is a need for equality. In taxation, that equality comes when the citizens are taxed rightfully. That is, the low-income earners are taxed less than the high-income earners (Sessions and Lee, 2008). The result of this is that the low-income earners are overtaxed, reducing the amount of disposable income that they have thereby been promoting poverty. Flat taxation is also called proportional taxation where the low and high-income earners are taxed equally. Progressive taxation is where the low-income earners are taxed less than the high-income earners and is available thanks to the marginal tax rate.
Sales tax is a regressive type of taxation because it bases mainly on consumption instead of income (Sessions and Lee, 2008). Therefore, it is tied to the conclusion that low-income individuals will pay a greater amount than the high-income individuals. Low-income earners do not live the same way as the top income earners. Most will live on a hand-to-mouth basis. Therefore, they will consume more than higher income earners. Taxing their consumption means that they will be the ones that will be taxed more. Therefore, Texas should adopt the income taxation system in a bid to eliminate the regressive nature of their system. That will favor the low-income earners in the area, allowing them a chance to develop themselves and ultimately develop the region. Moreover, it will be crucial towards eliminating poverty in the area.
Question 3
A positive outcome of government intervention is that it encourages greater equality regarding wealth redistribution than if it were left to individuals to decide upon the redistribution. The intervention centralizes the resources so that they are available to every member of the country (Manzetti, 2014). That minimizes conflicts and increases the safety of the nation. Another advantage is that it allows for macroeconomic intervention. It is common for the economy of every country to face recessions regarding productivity. The presence of a government can enable an economy to overcome prolonged recessions. For instance, the government can aid in the turnaround of companies facing entropy revitalizing the economy. The intervention also has its set of disadvantages and one of them is the fact that the government stands to make wrong decisions that will cost the nation by increasing negative aspects such as political pressure. That results in conflicts that ultimately cause economic recessions.
Another disadvantage is the fact that government intervention eliminates personal freedom. If the government failed to intervene, people would have had the freedom to exploit the resources in ways that they saw fit (Manzetti, 2014). Therefore, it is disadvantageous because it reduces innovativeness of the people. The government intervention reduces the ability of the citizens to become creative during the exploitation of the resources. As much as it is important for the government to partake in the exploitation of resources, there is a limit which it must observe. The available resources are limited. Therefore, if they are to be utilized, they must be used maximally. Therefore, the government should be partly involved in the redistribution of resources. However, for the exploitation part, the government should entrust that part of the citizens so that it can empower the innovativeness of the people.
References
Manzetti, L. (2014). Accountability and Corruption in Argentina During the Kirchners' Era. Latin American Research Review, 49(2), 173-195.
Miller, G. E., & Selden, T. M. (2013). Tax Subsidies for Employer-Sponsored Health Insurance: Updated Microsimulation Estimates and Sensitivity to Alternative Incidence Assumptions. Health Services Research, 48(2pt2), 866-883. doi:10.1111/1475-6773.12037
Sessions, S. Y., & Lee, P. R. (2008, October 22). Using Tax Reform to Drive Health Care Reform. JAMA: Journal of the American Medical Association. pp. 1929-1931.
