DANGER ZONE!

After looking back at my previous IB exams, I think one that one of the “danger zones” or thing I have to be careful with is my time management during tests. I usually have too much I want to write and too little time therefore my evaluation becomes untidy and unorganized. Although I’m good at going through the first small-point questions such as definitions in order to get to the evaluation, I have difficulties pacing my writing in the evaluation section. I think with more practice such as the in-class essay questions we have to prepare, I would get more used to it as I go.

Another point I have to work on is my evaluation skills. I need to study harder and understand the material more in order to give valid reasoning and examples. I’ve done well so far but as the material gets more difficult and complex, I wil have to deepen my knowledge on the working of economic concepts in order to support my evaluations.

ACLU Sues City, State Over Taxation of Same-Sex Couples

Following the topic of my previous post on tax equity, the American Civil Liberties Union (ACLU) filed a lawsuit for discriminating against same-sex couples as they are forced to pay more taxes than married couples are, denying them the right to tax exemptions (tax cuts) “allowed for senior citizens and disabled veterans”. The lawsuit asks for the state and Municipality of Anchorage to apply tax cuts to same-sex couples as if they were registered as married couples. According to state laws, married couples can apply for $150,000 tax exemption, no matter whether or not they share a joint home while same-sex couples, who are considered as room-mates rather than married, are only allowed half the exemption.

With an attempt to lower government costs and national debt, the US government decided to continue tax cuts in order to pursue income equity and encouraging spending but discriminates against same-sex couples. Overall, this becomes unfair just as if the rich were exempted from tax cuts.

The Difference Between Progressive and Regressive Tax

In simple terms, progressive tax is the opposite of regressive tax. Progress tax is when the more one earns, the higher the tax rate while regressive tax, being the direct opposite, is when one earns more, the lower the tax rate. Looking at the diagram on the left, one can see how as the income moves toward the left (increase) on the progressive curve, the tax paid increases while the opposite goes for the regressive. Because of this, regressive tax tends to help the richer and progressive tax tends to benefit the poorer.

In terms of types of taxes, income taxes, taxes that are directly related to income, are progressive while sales taxes, taxes put on goods and services, are regressive. This is done in order to keep the nation’s gap constant as the richer pay more for income tax while the poorer pay more for sales tax, which would neutralize each other. The wealthy pay less for goods therefore they would pay less sales tax but they would have to fill the gap by paying more income tax.

For example, if the tax rate for a single person A making 800,000 yen (about $8000) a month is 12%, the rate for the same single person B who makes 300,000 yen (or about $3000) would be much lower. Regarding regressive tax in sales taxes, because the same 30,000 yen for groceries would be worth less to person A than to person B in terms of income, person B pays more sales taxes since the tax rate for person A would be smaller than for person B. To keep this neutralizing method, luxury goods are taxed more for the wealthy buy more luxury good than the poorer does.

Eliminating Tax Cuts, Excluding the Wealthy

In his article “A Gift the Wealthy Don’t Need”, Robert H. Frank proposes that all tax cuts be eliminated for everyone except for the upper bands of society: the rich. This seems unfair as the people who need it most don’t get it and people who need it least  do. Because the wealthy have to most potential to spend, tax cuts to encourage the rich to spend this extra money that they save on goods and services as they would get to pay less. Looking at the siutation, this system makes sense as tax cuts for the poor would do the country little good as most of them already spend most of their money on necessities such as groceries, etc. Even if they eliminate tax cuts for the lower percent of society, there isn’t much more that the people can save anyways therefore eliminating tax cuts from them would not end up neutralizing the money the upper bands of society spend. Using money to stimulate the lower sections would only increase the country’s already skyrocketing national debt.

Yet, it is true that only giving tax cuts to the one section of society that doesn’t need it is very unfair to the other sections who need to pay so much more tax when they already spend most of their money on necessities. Most of the members of this sector are the ones producing most of our goods and services so by carrying out this decision, the country is risking riot and rebellion. This would indeed create a lot of angry rioters and would encourage people to avoid taxes and push them off the edge rather than try to help the country’s economy by producing quality products.