Producers are also not taxed on each additional unit they produce as is the case with a per unit tax. With a lump sum tax rate, producers are not "punished" for increasing their production by being subject to a higher tax bracket if they increase their revenue.
Lump sum taxes are widely considered the form of taxation that promotes the most economic efficiency. This is why smaller businesses tend to oppose lump-sum taxes and why they benefit larger organizations. A person or business with a lower income will have to devote a larger portion of their income to the lump sum tax. Since lump-sum taxes are the same rate regardless of income, they can affect those with a lower income more. Figure 1 shows us how a $100 lump sum tax can take up a significant portion of a low income making the tax burden high, while taking up a smaller portion of a higher income, lowering the tax burden there. 1 - Lump Sum Tax as a portion of Incomeįigure 1 pictures how a lump sum tax burdens taxpayers differently and affects their level of disposable income. The revenue from the lump sum tax will be $100 every month.įig. It does not matter if the shop is open one day or every day that month, if fifty people buy something or no one does, or if the shop has 20 square feet or 20,000 square feet. Each shop must pay a $10 fee to operate every month.
0 kommentar(er)
