Poor people would have it worse because basic necessities aren’t (1) optional and (2) not priced dependent on income. The first certain amount of income for everyone must be spent on staying alive (food, medicine, water, etc.) and having somewhere to exist (rent/mortgage). Whatever is left over can be spent on high quality of those, hobbies, and luxuries. That means that the lowest earners spend their life merely surviving with no joy or options. They just try to exist until they can’t. Higher earners can afford to consume higher quality basic necessities and have options (e.g. beef, organic, etc.). The even higher earners can spend their extra income on enjoying hobbies and luxuries. Beyond that, people can spend their money on making more money and directing the economy (aka investments).
By charging a flat rate, poorer earners would be getting taxed almost exclusively on surviving. The highest earners would be getting taxed very little on surviving, so they would have a lot more money left over to afford luxuries and making more money. Because of this, most liberal economies use a progressive tax code (i.e. higher tax rates on higher income brackets). It allows people to survive while limiting the runaway effect from the highest earners making money exponentially. This would then destroy the economy because no one would be able to afford anything and the economy would halt. I mean, it’s still happening, but not as bad as if it were a flat tax rate.
What I think happens is that the rich control the levers and the poor are the masses. People that write tax codes have to make sure to balance the two. If it tips too much one way or another, we have problems. Too in favor of the rich (e.g. flat tax rate) and there would either be an economic depression or the masses revolt. Too in favor of the masses, and the rich form a coup or run with their money to another country and develop the economy there.
Poor people would have it worse because basic necessities aren’t (1) optional and (2) not priced dependent on income. The first certain amount of income for everyone must be spent on staying alive (food, medicine, water, etc.) and having somewhere to exist (rent/mortgage). Whatever is left over can be spent on high quality of those, hobbies, and luxuries. That means that the lowest earners spend their life merely surviving with no joy or options. They just try to exist until they can’t. Higher earners can afford to consume higher quality basic necessities and have options (e.g. beef, organic, etc.). The even higher earners can spend their extra income on enjoying hobbies and luxuries. Beyond that, people can spend their money on making more money and directing the economy (aka investments).
By charging a flat rate, poorer earners would be getting taxed almost exclusively on surviving. The highest earners would be getting taxed very little on surviving, so they would have a lot more money left over to afford luxuries and making more money. Because of this, most liberal economies use a progressive tax code (i.e. higher tax rates on higher income brackets). It allows people to survive while limiting the runaway effect from the highest earners making money exponentially. This would then destroy the economy because no one would be able to afford anything and the economy would halt. I mean, it’s still happening, but not as bad as if it were a flat tax rate.
What I think happens is that the rich control the levers and the poor are the masses. People that write tax codes have to make sure to balance the two. If it tips too much one way or another, we have problems. Too in favor of the rich (e.g. flat tax rate) and there would either be an economic depression or the masses revolt. Too in favor of the masses, and the rich form a coup or run with their money to another country and develop the economy there.