Abstract
Many of the lowest income taxpayers receive substantial benefit in the form of the earned income tax credit. The middle class taxpayers are able to exploit many tax incentives, including mortgage deductions, Roth IRAs and educational IRAs. The wealthy benefit from the favorable capital gain tax rates. This country’s tax system has always been based upon a progressive structure. Additional steps need to be taken to ensure progressivity between the lower to middle income taxpayer and higher income taxpayers and to counter other tax benefits provided to the higher income taxpayers that have resulted in a flatter tax structure. Additional progressivity would also benefit low income taxpayers that receive negligible earned income tax credits.
Part II of this article explores the methodology, constitutionality and equity of progressive taxation. Part II also explores the history of graduated tax rates and the constant fluctuations to establish the proper level of taxation. Part III of the article outlines the failure of the current tax scheme in promoting a progressive tax system. For example, if a wealthy taxpayer purchases a capital asset after December 31, 2000, and holds on to the asset for five years, the taxpayer is subject to a tax rate of 18% upon the disposition of the asset. Upon a comparison of that rate with the 15% ordinary income rate for low income and low to middle income taxpayers, the tax system fails to uphold the ability-to-pay principle. Either the low income taxpayer’s rate is too high or the high income taxpayer’s rate is too low. Part III also considers the impact of proposed legislation, and explores the increased gap between the wealthy and the lower income taxpayers created under the Code. Part IV of this article examines the reasons supporting the continued maintenance of progressive taxation in today’s society. This part will also address whether globalization dictates a retrenchment from progressive taxation to protect this country from becoming less competitive with other countries. Part IV will also address how the tax scheme should be reformed to strengthen progressivity. This reformation is essential to reverse the negative impact of tax provisions on women and minorities. This part concludes with a proposal to reduce the lowest marginal brackets to ensure that most taxpayers will benefit from the tax cut while adhering to the traditional ability-to-pay and progressive tax principles.
Recommended Citation
Vada Waters Lindsey,
The Widening Gap Under the Internal Revenue Code: The Need for Renewed Progressivity,
5 Fla. Tax Rev.
(2002).
Available at: https://scholarship.law.ufl.edu/ftr/vol5/iss1/1