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Tax Fairness

A system of taxation that is equitable for all taxpayers

Tax Fairness

A major hot-button issue in America right now is tax fairness. There are arguments on not only how taxes are used but who gets taxed. Ideally, tax fairness is the equitable fairness of taxes to all citizens. However, some institutions receive tax breaks or are exempt from them as a whole. This challenges the average American’s idea of fairness, especially when they feel they pay more than big money companies.

To understand tax fairness, we need to understand the systems of taxation. They’re broken into three categories: regressive, progressive, and blended taxation. Progressive taxes increase as income increases, meaning individuals pay more when they make more. Regressive taxes are where lower-income households share equal or more tax burden than high-income households. Flat taxes are considered regressive. Blended taxation or effective tax rates average out multiple factors beyond income to decide the tax rate.

Beyond tax, types are 12 specific taxes that American citizens face. These include taxes on what you earn, buy, and own. Specific taxes range from payroll taxes to sales tax on what you buy. What is and isn’t taxed can be decided upon by states. New Hampshire and Montana, for example, don’t collect sales tax. Sales tax is unique to America, as most industrialized nations have moved away from this taxation method.

Advocates for fax fairness push against the traditional methods of tallying taxes. They believe the tax should be fair, not equal. It suggests paying what you are able on taxes, not a flat rate. It would mean lower-income houses shoulder less burden, and more profitable households and companies shoulder more. 

Yet the word fairness is often debated among politicians. What is fair to one person may not represent fairness to another or greater society. Those against tax fairness claim it’s unfair for larger companies to shoulder burdens that aren’t theirs.

Who is Exempt from Taxes

Arguments on fairness further complicate when you consider the institutions exempt from taxes. To become tax-exempt, an organization must reach specific requirements set by the Internal Revenue Code Section 501. These are commonly charitable and religious organizations but extend to educational and public safety organizations. 

Some political organizations qualify for exemptions. So long as most of the money is explicitly spent on political activities like campaigning. While generally, individuals don’t argue for tax exemptions for education and literacy, other exemptions come under scrutiny. Some argue that it’s not fair to have political or religious exemptions.

Blended taxation is America’s current solution to tax fairness, but stronger advocates of the cause believe it’s not enough. They suggest higher taxes and audits on big organizations that they deem can afford the price hike. The term ‘paying their fair share’ is coined to lessen cuts and tax breaks of multi-million dollar organizations.

Some representatives even fight for the taxation on inheritances and the creation of new taxes for the super-rich 1%. Is it fair to place larger taxes on the rich? Are billionaires obligated to shoulder financial burdens from the American public? Depending on your definition of fairness, it may be.

See your state’s representatives’ ideas on tax fairness to find what tax type they stand for and how they seek to help the American people.

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