Assume a 10% tax rate on
all
sales & that individuals have the following saving habits...
|
gross |
amount
|
amount
|
tax
|
|
avg. tax rate
(tax/income) |
|
income |
saved |
spent |
paid |
|
|
|
|
|
|
$10,000 |
$0 |
$10,000 |
$1,000 |
|
10.0% |
|
$25,000 |
$500 |
$24,500 |
$2,400 |
|
9.8% |
|
$40,000 |
$1,300 |
$38,700 |
$3,870 |
|
9.8% |
|
$60,000 |
$5,000 |
$55,000 |
$5,500 |
|
9.2% |
|
$100,000 |
$20,000 |
$80,000 |
$8,000 |
|
8.0% |
|
$500,000 |
$120,000 |
$380,000 |
$38,000 |
|
7.6% |
|
$2,000,000 |
$1,000,000 |
$1,000,000 |
$100,000 |
|
5.0% |
Note that a sales tax would be a
proportional tax if
everyone spent all of their income, but that is not
something that ever happens
The Progressive Income Tax:
Theoretical foundations |
