Wednesday, April 20, 2022
Brunson: Discount Basement Progressivity? Constitutional Flat Taxes, Demogrants, And Progressive Revenue Taxation
Samuel D. Brunson (Loyola-Chicago; Google Scholar), Discount Basement Progressivity? Constitutional Flat Taxes, Demogrants, and Progressive Revenue Taxation, 53 Loy. U. Chi. L.J. __ (2022):
State and native governments increase income in three major methods: property, gross sales, and revenue taxes. Property and gross sales taxes are inclined to impose the next burden on low-income households. To make sure the equity and progressivity of their general income system, states want their revenue tax to be sufficiently progressive.
4 states face an apparently insurmountable barrier to progressive revenue taxation: their state constitutions mandate that any revenue tax should have a flat price, relevant to all taxpayers. With out a constitutional modification, a troublesome course of, they can not undertake marginal charges that improve as revenue will increase.
Whereas the obstacle seems insurmountable, nonetheless, it could actually in truth be overcome. Furthermore, it could lead these states to undertake a more-progressive revenue tax. By means of the usage of a flat-rate revenue tax with a refundable tax credit score—known as a “demogrant”—states can enact a flat-rate revenue tax that’s concurrently remarkably progressive and is extra economically environment friendly than an revenue tax with progressive marginal charges.
Any such flat-rate tax with a demogrant ought to meet the constitutional necessities of states with necessary flat-rate taxes. However it doesn’t should be restricted to these states; whereas legislative inertia prevents most states from shifting to a flat-rate tax with a demogrant, the profitable adoption of such a tax by a constitutionally-constrained state could encourage different states with out constitutional constraints to contemplate this extra environment friendly mannequin of progressive revenue taxation.
https://taxprof.typepad.com/taxprof_blog/2022/04/bargain-basement-progressivity-constitutional-flat-taxes-demogrants-and-progressive-income-taxation.html
