The amount of cash flowing into the state budget is constantly monitored by the country's tax system . In order to redistribute the tax burden from poor to wealthy legislators, a progressive taxation scale was invented, which was used in Russia until 2000. But along with the positive aspects, progressive taxation, as it turned out, has its drawbacks that make it not very popular.
What is progressive taxation?
To explain in simple words, a progressive tax is a fee that is calculated in proportion to the income received. In other words, the more you get, the higher the tax.
Such a tax system has its own economic meaning. It is designed to redistribute tax payments between citizens who have different income levels. A progressive scale is able to most effectively manage the social stratification of the population.
What tax was progressive
A progressive taxation scale in Russia has been applied to personal income tax. Depending on the amount of income received, personal income tax had several interest rates. For each category, a certain yield framework was established, in case of exceeding which the rate changed upwards. Due to the fact that the tax base was calculated on an accrual basis, the tax increase for employees of the enterprise occurred closer to the end of the year.
The main types of taxation with a progressive nature of accrual
Progressive taxation can have various charging mechanisms. In this regard, they can be divided into several types:
- The basis of a single-stage accrual is the minimum non-taxable amount of income and a rather high rate.
- The multistage accrual principle has several levels of profitability, limited to certain amounts. Within such a system, two to fifteen steps can be used. An interesting feature of this accrual method is the fact that when moving to the next level, the increased rate is valid only in that part of the profit that exceeds the established threshold.
- A progressive taxation scale can have a linear accrual basis. It is based on a gradual increase in the basic tax rate, depending on the growth rate of income. Such a system is considered quite effective, but difficult to implement.
Each of the above systems of progressive taxation has its pros and cons and is used in various countries, depending on the state taxation policy. So, in some countries, a certain type ensured the efficient receipt of budget payments, while in others the method completely failed.
Will the progressive tax return to our country?
More recently, lawmakers have again raised the issue of introducing a progressive taxation scale. The proposed method is based on a multi-stage accrual method. Each separate category is assigned its own tax rate, and when moving from one step to another, income is taxed in terms of exceeding the standard. For example, categories of people with incomes up to 60 thousand rubles were proposed. set a rate of 5%. Higher incomes - from 60 to 600 thousand rubles. - tax 15%, and accruals from 600 thousand rubles. - 25%. But, despite the fact that such a progressive scale of taxation could bring significant revenues to the budget, the law was rejected. The method was postponed until the time when it becomes most effective for the economic development of the country. Also the reason for the deviation was the high costs associated with the introduction of such a system.
Differential rate tax system
As an alternative example of progressive taxation, a differentiated system for calculating value added tax fees can be given. The essence of the idea is that when taxing basic necessities, it is proposed to use the lowest rate, and for higher-priced goods to apply a higher one. It is assumed that the citizens with the highest income are the main buyers of luxury goods, in connection with this they will pay tax at an inflated rate. In turn, citizens with low incomes will be relieved of this burden. Such a system can most evenly distribute the tax burden between segments of the population.
Flat and progressive tax scales are in constant competition. Supporters of flat taxation argue their argument with the fact that a progressive scale reduces the motivation of citizens to earn more, as tax revenues increase with increasing income. In turn, a flat scale does not contribute to the establishment of social justice, equalizing all citizens, regardless of income.
Pros and cons of progressive taxation
Like any system, a progressive taxation scale has its positive and negative characteristics. Among the advantages can be noted the effective receipt of budget payments, the reduction of social division of society. The disadvantages of the progressive scale include an increase in shadow income, an increase in unemployment, a decrease in material incentives, and high implementation costs.
If we analyze all of the above, we can conclude that the progressive taxation scale is a rather powerful regulator of social inequality and a source of additional income to the budget. Perhaps the taxation models proposed by lawmakers are not entirely ideal, but there is confidence that, based on the experience of other countries and taking into account the peculiarities of our economy, the result will be the right decision, which will be most acceptable for ordinary citizens.