The following paper was a revised version of an original work presented as contribution for the participation of the SMC Open Essay Contest Justice and Taxation opened until 15th December, 2010. Different parts are revised and integrated with the evolution of the fiscal policy. However, the scope is to present a key idea in a facilitated form.
The key topic is about the justice and taxation.
Table of Contents
Preface
1. Introduction
2. Definition and characteristics
3. The advantages
4. Proposal and Conclusion
Objectives and Topics
This paper explores the economic and philosophical implications of fiscal policy, specifically comparing progressive taxation with a flat tax system. The primary goal is to demonstrate that a flat tax can achieve equivalent internal revenue for the state while increasing economic efficiency and reducing administrative complexity, thereby reshaping the social contract between the state and its citizens.
- Comparative analysis of flat versus progressive taxation systems.
- Economic incentives and their impact on tax evasion and fiscal behavior.
- The role of tax simplification in reducing administrative costs and uncertainty.
- Proposing a model for a balanced, equitable flat tax implementation.
- Reconsidering the social contract between the government and the taxpayer.
Excerpt from the Book
3. The advantages
In order to introduce the advantages of flat taxation in comparative terms it is necessary from my point of view to examine the objectives of the two parties: the government and the taxpayer.
Imaging that each party is represented by two different objective functions, the equilibrium is localized in the intersection of the graphic that represents the two functions. Therefore following this assumption it is necessary to analysis the objectives and find a possible coincidence of interests.
The objective function or interests of the government are to obtain the internal revenue predicted. Naturally, it is necessary to predict a legal sanctions system and an efficient monitoring system for the tax evader. A deficit in the internal revenue is problematic for the government, because it obliges the government to increase taxation in its different forms or reduce public spending.
The interest of the taxpayer is clearly to pay as little as possible, because taxation reduces the income available for personal choice, but at the same time, to receive good public services. To this end, it is useful to remember that more public spending is not synonymous with better public services.
Summary of Chapters
Preface: The author introduces the document as a refined version of an essay originally submitted to the SMC Open Essay Contest, focusing on the evolution of fiscal policy.
1. Introduction: This chapter establishes the core problem of taxation in relation to economic history and the social contract, questioning the principles of flat versus progressive taxation.
2. Definition and characteristics: This section defines the mechanisms of flat tax, providing historical context on its adoption in Eastern Europe and comparing it numerically to progressive tax systems.
3. The advantages: This chapter analyzes the trade-offs between government and taxpayer objectives, utilizing the Laffer Curve and discussing how system simplification mitigates tax evasion and fiscal drag.
4. Proposal and Conclusion: The author presents a model for an equitable flat tax system incorporating fidelity premiums and concludes that such a system fosters a more positive relationship between citizens and the state.
Keywords
Flat tax, Progressive taxation, Fiscal policy, Social contract, Income tax, Laffer curve, Tax evasion, Internal revenue, Economic efficiency, Fiscal drag, Public services, Taxpayer, Equity, Economic incentives, Fiscal system.
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the fundamental principles of taxation systems, arguing for the adoption of a flat tax model over the traditional progressive taxation systems currently used by many major economies.
What are the central themes discussed?
The central themes include the efficiency of tax collection, the reduction of administrative complexity, the mitigation of tax evasion, and the philosophical reconsideration of the social contract between the state and its citizens.
What is the primary objective of the author?
The primary goal is to present a coherent and applicable model for a flat tax rate that provides incentives for honest behavior and ensures stable internal revenue for the government.
Which scientific methodology is employed?
The author uses a comparative economic approach, analyzing fiscal structures through objective functions, mathematical calculations of tax revenue, and references to economic theories like the Laffer Curve.
What topics are covered in the main section?
The main section covers the definition of flat tax, a comparative analysis of its performance against progressive systems, the economic implications of fiscal complexity, and the proposal of a model to reduce tax evasion.
Which keywords best characterize this work?
Key terms include Flat tax, Progressive taxation, Fiscal policy, Social contract, Tax evasion, and economic efficiency.
How does the proposed model specifically address tax evasion?
The model suggests creating a conflict of interest between honest taxpayers and tax evaders by offering a 'fidelity premium' in the form of a reduced flat tax rate for compliant taxpayers over time.
What role does the 'Laffer Curve' play in the author's argument?
The author references the Laffer Curve to illustrate the trade-off between tax rates and tax revenues, arguing that excessive tax rates can lead to disincentives that ultimately reduce government revenue.
How does the author define 'fiscal drag'?
The author describes fiscal drag as the increasing fiscal pressure that arises from progressive taxation combined with an increase in nominal income, especially during periods of inflation.
What does the author conclude about the 'social contract'?
The author concludes that a fair taxation system, such as a flat tax, establishes a new, more transparent relationship between the citizen and the state, based on mutual respect rather than the coercion of complex, opaque tax codes.
- Quote paper
- Andrea Vicini (Author), 2015, Justice and taxation. A reconsideration of the social contract between State and Citizens, Munich, GRIN Verlag, https://www.grin.com/document/315554
