A progressive income tax system can be used to mitigate such income inequality. ![]() Even assuming healthy margins of safety under these statistics, there is a high degree of income inequality in the state of Arizona. By contrast, the average income among the bottom 20% earning Arizonans is roughly $15,000. The average income among the top 20% earning taxpayers in Arizona is roughly $210,000. Even if we assume that these systems work well at the federal level, they may not provide the same benefits at the state level. However, the federal code also provides for flat taxes, such as payroll taxes. Today, the lowest and highest federal tax rates range from 10% to 37% respectively, with the goal of ensuring that the burden of funding rests on the Americans with the most disposable income. The federal government has been collecting income tax through a progressive system since 1862. ![]() In turn, the poorest and wealthiest taxpayers alike pay the same tax rate on every dollar earned, eliminating any structural wealth redistribution. Ī flat income tax system, on the other hand, demands that each taxpayer relinquish the same percentage of their income to the hands of the government, regardless of their income level. Many argue that progressive tax systems provide low-income households the breathing room necessary to ensure that all people have the opportunity to reach their full potential despite their tax burdens. This kind of income taxation is based on the concept of the ability to pay. As a result, such systems collect less income from the poorest households, making up the revenue difference by taxing high earners more harshly. Progressive tax systems, by their very definition, impose progressively higher tax rates on individuals as their income level rises. ![]() With all this said, the question that remains is whether Arizona’s new income tax system will serve its citizens better than its former tax system. On the flip side, the vast majority of states still maintain a multi-bracketed income tax system. Moreover, Mississippi joined the ranks alongside Arizona this year and Iowa will follow suit in 2026. As of 2021, nine other states have adopted a flat state income tax rate. Īrizona isn’t the only state with a flat income tax. In turn, all Arizonans, regardless of income level, will be taxed at 2.5% at the state level moving forward. Well, in September 2022, such triggers were met. In fact, SB 1828 itself had provisions that would converge the two remaining tax brackets into a single flat tax rate of 2.5% if Arizona met certain revenue triggers. The shift toward a flat income tax system was imminent. This change effectively condensed the three former highest tax brackets into a single bracket, taxed at 2.98%. Immediately after SB 1828’s passage into law, Arizona’s income taxation shrunk to two brackets only, where all income up to $27,808 was taxed at 2.55%, with any income in excess of that dollar amount taxed at 2.98%. This progressive tax structure had the effect of taxing Arizonans at an increasingly punitive rate as they earned larger taxable incomes. The lowest bracket taxed individuals at 2.59% of income below $27,808 and hit a maximum tax of 4.5% on every dollar beyond $166,844. ![]() Prior to former Arizona Governor Doug Ducey signing Senate Bill 1828 into law on J, the Arizona state income tax consisted of four distinct tax brackets. Long is the debate on whether state income tax should be split into different tax brackets, kept at a single flat rate, or eliminated entirely. Arizona’s Past and Current Income Tax System
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |