Discuss tax systems and political philosophies associated with income inequaliti

Question

Discuss tax systems and political philosophies associated with income inequalities. List and describe the relationship between the two tax principles and three tax systems discussed in this course. Include comments regarding the effects of tax on society’s welfare highlighting sources, recipients, and types of discrimination that are present. List and describe the three political philosophies as well. Include the best pairing of tax system for each political philosophy.

Bonus: Include a prominent philosopher within each philosophy discussed.

Explanation / Answer

Answer. Mainly there are three types of tax systems: Regressive tax system, Proportional tax system and Progressive tax system.

Regressive tax system- In this system, lower income group pays more taxes and higher income groups pay less taxes. It increases income inequality.

Proportional tax system- In this system, people pay some amount of tax proportion to their income.or pay a tax equivalent to the fraction of their income

Progressive tax system: In this system, rich income group pays more tax and lower income group pays no or less tax. It promotes income equality.

The primary objective, the government collects tax is to finance its budget deficit or redistribute income among the soicety. If the government imposes taxes, the the following consequences can be seen:

1. Inadequate income: The income distribution in an economy can change depending on which type of tax policy government is implementing.

2. High price level: When government implements taxes on goods and services, their price rises.

3. Poverty and high crime: This could be the case when government implements high tax rate and adopts regressive tax policy. This will increase poverty and income inequality and crime level increases.

4. Increase in dead weight loss: The imposition of tax increase dead weight loss in the society.

5. Chromic ression: If the tax rate is high, the it could bring chronic ression due to fall in aggregate demand.

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