Question

Comment on the description of the Lorenz Curve? Is this okay? Which type of tax system are you in favor of and why? (progressive, proportional (flat), or regressive) Which is the best and why? Should we penalize a person because the market pays them a certain wage that is higher than the norm? (Ex: professional athlete, movie star, doctor, CEO, etc.) Why or why not?

Answer 1

Lorrenz Curve

The Lorenz curve is a graphical representation of income inequality or wealth inequality developed by American economist Max Lorenz in 1905. The graph plots percentiles of the population on the horizontal axis according to income or wealth. It plots cumulative income or wealth on the vertical axis, so that an x-value of 45 and a y-value of 14.2 would mean that the bottom 45% of the population controls 14.2% of the total income or wealth.

Lorrenz Curve represent economic inequality and unequal distribution in the system. The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality

Of all the tax system I am in favour of progressive tax system as it seems to be fair.As the income increases the tax rate also increases, this people with high income are taxed more as compared to people with low Income. A progressive tax imposes a greater percentage of taxation on higher income levels, operating on the theory that high income earners can afford to pay more.

It is debatable that people with high income like CEO, movie stars , athletes should pay more in the form of taxes. According to me it is fair and just if they pay more. They earn high from society so, it is their duty to pay it back in some form or other.Taxing the rich more will help to fund. programs such as affordable healthcare, Pell grants, food stamps, and Earned Income Tax Credit – or given to working- and middle-class Americans through tax cuts. This will help in redistribution of money in economy this contributing to economic growth.Tax hikes on the rich would have little impact on their spending, since most of this income would likely have gone into savings. Such people already have lot of money. So it is not bad to tax them at higher rate rather this the contribution made by them for development of economy and to help the poor and needy people.