THE TRAP OF A GRADUATED INCOME TAX SYSTEM

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Here's something that we need to get across to anyone who thinks that government assistance of any kind is benovlent.

It isn't! If it is anything, it is a trap form which it is difficult to escape.

All of us have noticed that the "cost of living" seems to always go up and never goes down. That's due in large part to inflation (as defined elsewhere in this web site) and as long as the federal government engages in the practice of deficeit spending that's going to be true. The thing to keep in mind is that business are going to also be affected and that in order to remain profitable they must increase their retail prices. Thus, inflation also causes increases in your food bill, your apartment rent, your electric bill, the cost of gasoline, and everything your pay for as a retail purchase.

The trap is that as you personal income goes up so does the amount the government takes from you as a percentage of your income.

Suppose you were earning $3000 per month and your tax rate was 25%. The cost of living has gone up 10% so you request and receive a 10% increase to $3300 per month. You are now even with the cost of living increase, right? Wrong! We happen to have a graduated income tax system and that $300 a month increase has probably bumped you to a 26 or 27% income tax rate.

At your old income level you were taxed at a rate of 25% or $750 a month. If your new tax rate is 26% then you are now paying $858 a month in taxes which leaves you $2442 a month after taxes. You previously had $2250 a month after taxes. A 10% increase would be an increase of $225 and yield an income of $2475 per month. You are now $33 a month shy of being truly 10% ahead of where you were before you got a raise.

For those on government assistance the effect is at its worst because they have no control at all over their income. As the amount of assictance they receive goes up so must the cost of their necessities (food, electric, rent, gas, etc). Because of inflation and the inefficiencies in the collectioon and distribution of tax proceeds those people on government assistance find it more and more difficult just to stay even

The only way to end this is to put an end to a graduated income tax system and the best way is to implement some sort of flat-tax system. There is more on this topic elsewhere on this site.