2024-09-26 16:11:43
Equal taxation benefits the rich more than the poor
High tax rates do not automatically guarantee more revenue for the treasury. This is stated in an analysis by economists Georgi Kamburov and Georgi Kocharkov, which takes into account the peculiarities of taxation after the introduction of the flat tax.
According to experts, however, the flat tax is more beneficial for the rich, but it has reduced the marginal rate for about two-thirds of all working people. People with mostly high incomes benefited from this, while those with low incomes were harmed. The authors of the report took into account not only the direct tax, but also social and health insurance.
They point out that before the introduction of the flat tax, the burden of taxation fell from 36 to 23%. However, the taxable income of those in the highest marginal tax rate increased by 6%. A clear advantage of a flat tax compared to progressive taxation is that it protects working people from uncertainty.
With concrete data, the authors also prove that a possible increase in the marginal rate for high incomes leads to losses of economic efficiency. At the same time, higher income taxes would lead to a better sharing of risks associated with differences in labor market entry as well as economic risks throughout life.
Another benefit of a higher marginal tax rate, especially for the rich, would be increased revenue and better public services.
In the short term, tax reductions could occur if there is an increase in the number of hours worked or stricter compliance with tax legislation. In the long term, this can be applied to raising the educational level and accumulating human capital, the authors of the analysis believe.
They are adamant that the level of income tax in Bulgaria is currently low. Increasing them may lead to a decrease in revenue, but only if they are raised to much higher levels than the existing ones. But they make the stipulation that possible tax changes should be made by finding a balance between economic efficiency and overcoming inequalities.