Ron Larson
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5.1 Flat Tax & Political Philosophy

5.1 Flat Tax & Political Philosophy
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  • 9. Regressive, Flat, or Progressive

    Determine whether the tax is regressive, flat, or progressive. Explain your reasoning. (See Example 3.)

    Social Security tax of 6.2% on earnings up to $106,800

    • Worked-Out Solution

      Social Security taxes are regressive because they apply only to earnings up to a certain amount. In 2011, the maximum Social Security tax paid by an employee was 6.2% of $106,800.

      (A self-employed person would have paid a maximum of twice this amount.)

      If an employed person earned $200,000, he or she would still have paid only $6621.60, which means that the percent paid on total income would be less than 6.2%. This implies that the tax is regressive.

      From its inception, Social Security tax has been regressive. In 1994, however, Medicare tax was split off from Social Security tax. At that time, the income cap on Medicare was removed, making it a flat tax.

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      ______     ___      ______    ______   _    _   
 /_   _//   / _ \\   /_   _//  /_   _// | \  / || 
 `-| |,-   / //\ \\  `-| |,-    -| ||-  |  \/  || 
   | ||   |  ___  ||   | ||     _| ||_  | .  . || 
   |_||   |_||  |_||   |_||    /_____// |_|\/|_|| 
   `-`'   `-`   `-`    `-`'    `-----`  `-`  `-`
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  • 10. Regressive, Flat, or Progressive

    Determine whether the tax is regressive, flat or progressive. Explain your reasoning. (See Example 3.)

    17% income tax on all income over $12,500

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      ______   __   __    _____     _____    __   _   
 /_   _//  \ \\/ //  /  ___||  |  ___|| | || | || 
 `-| |,-    \ ` //  | // __    | ||__   | '--' || 
   | ||      | ||   | \\_\ ||  | ||__   | .--. || 
   |_||      |_||    \____//   |_____|| |_|| |_|| 
   `-`'      `-`'     `---`    `-----`  `-`  `-`
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  • 11. Regressive, Flat, or Progressive

    Determine whether the tax is regressive, flat, or progressive. Explain your reasoning. (See Example 3.)

    19% income tax on all income

    • Worked-Out Solution

      This is a flat tax because it is the same percent on all income.

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     __   __    ______               ___     _    _   
 \ \\/ //  /_   _//     ___     / _ \\  | || | || 
  \   //    -| ||-     /   ||  | / \ || | || | || 
  / . \\    _| ||_    | [] ||  | \_/ || | \\_/ || 
 /_//\_\\  /_____//    \__ ||   \___//   \____//  
 `-`  --`  `-----`      -|_||   `---`     `---`   
                         `-`
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  • 12. Regressive, Flat, or Progressive

    Determine whether the tax is regressive, flat or progressive. Explain your reasoning. (See Example 3.)

    7% sales tax

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      ______    _____    _    _      ___      _____   
 /_   _//  |  ___|| | |  | ||   / _ \\   /  ___|| 
 `-| |,-   | ||__   | |/\| ||  / //\ \\ | // __   
   | ||    | ||__   |  /\  || |  ___  ||| \\_\ || 
   |_||    |_____|| |_// \_|| |_||  |_|| \____//  
   `-`'    `-----`  `-`   `-` `-`   `-`   `---`
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  • 13. Connecticut State and Local Taxes

    The income for a family in the middle 20% is $58,000. How much, in dollars, does this family pay for each type of tax? (See Example 4.)

    • Worked-Out Solution

      For a family with an income of $58,000, the taxes are as follows.

      yellow box Sales & excise taxes:
      green box Property taxes:
      blue box Income taxes:
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      ______    ______    _____     _____    _    _   
 /_   _//  /_   _//  / ____||  |  ___|| | |  | || 
 `-| |,-    -| ||-  / //---`'  | ||__   | |/\| || 
   | ||     _| ||_  \ \\___    | ||__   |  /\  || 
   |_||    /_____//  \_____||  |_____|| |_// \_|| 
   `-`'    `-----`    `----`   `-----`  `-`   `-`
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  • 14. Connecticut State and Local Taxes

    The income for a family in the top 1% is $3,160,000. How much, in dollars, does this family pay for each type of tax? (See Example 4.)

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      _____      ___     _____       ___              
 |__  //    / _ \\  |  __ \\    / _ \\    ____    
   / //    / //\ \\ | |  \ ||  | / \ ||  |    \\  
  / //__  |  ___  ||| |__/ ||  | \_/ ||  | [] ||  
 /_____|| |_||  |_|||_____//    \___//   |  __//  
 `-----`  `-`   `-`  -----`     `---`    |_|`-`   
                                         `-`
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  • 15. Connecticut Classifying Taxes

    Determine whether the three types of taxes are regressive, flat, or progressive in Connecticut. Explain your reasoning. (See Example 4.)

    • Worked-Out Solution
      Sales & excise taxes: The rate decreases as income increases. These taxes are regressive.
      Property taxes: The rate decreases as income increases. These taxes are regressive.
      Income taxes: The rate increases as income increases. These taxes are progressive.
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      ____       ___     _    _    _    _     ______  
 |  _ \\    / _ \\  | || | || | || | ||  /_____// 
 | |_| ||  / //\ \\ | || | || | || | ||  `____ `  
 | .  //  |  ___  ||| \\_/ || | \\_/ ||  /___//   
 |_|\_\\  |_||  |_|| \____//   \____//   `__ `    
 `-` --`  `-`   `-`   `---`     `---`    /_//     
                                         `-`
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  • 16. Classifying Connecticut Taxes

    Are taxes, as a whole, regressive, flat, or progressive in Connecticut? Explain your reasoning.(See Example 4.)

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      _  __     ___      ______     ___      _  __  
 | |/ //   / _ \\   /_____//   / _ \\   | |/ // 
 | ' //   / //\ \\  `____ `   | / \ ||  | ' //  
 | . \\  |  ___  || /___//    | \_/ ||  | . \\  
 |_|\_\\ |_||  |_|| `__ `      \___//   |_|\_\\ 
 `-` --` `-`   `-`  /_//       `---`    `-` --` 
                    `-`
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