Question

explain why the three (or four) part state tax formula is fair

Answer 1

State income tax is imposed at a fixed or graduated rate on taxable income of individuals, corporations, and certain estates and trusts. The rates vary by state. Taxable income conforms closely to federal taxable income in most states, with limited modifications.State income tax is allowed as a deduction in computing federal income tax, subject to limitations for individuals.

The three types of taxes are the proportional tax, the progressive tax, and the regressive tax.

A proportional tax imposes the same percentage of taxation on everyone, regardless of income. If the percentage tax rate is constant, the average tax rate is constant, regardless of income. This means that if a person's income goes up, the percentage of total income paid in taxes doesn't change.

The second tax, the progressive tax, imposes a higher percentage rate of taxation on those with higher incomes. Progressive taxes use a marginal tax rate that increases as the amount of taxable income increases. Therefore, the percentage of income paid in taxes increases as income goes up.

The final tax is the regressive tax, which imposes a higher percentage rate of taxation on low incomes than on high incomes. For example, if the state sales tax were 5%, the person with the lower income would pay a greater percentage of their total income in sales tax.

It is fair as :-

The first point is that the fairness discussion is meaningful, if endless. Voter perception of the federal tax system’s perceived equity is a powerful driver of US political outcomes. “Every major [tax structure] change in the last 200 years has been prompted and shaped by an argument over what’s fair,” said Joseph Thorndike, director of the Tax History Project at the nonprofit organization Tax Analysts, at a June 15 roundtable discussion on taxes and the rich.

The second point is that in the United States the federal tax code has almost always been progressive. That means the richer you get, the higher percentage of your income you have to pay to Uncle Sam. The federal income tax began as a levy on the wealthy. When it was expanded to a tax that burdened the mass of Americans, politicians sold the move partly by saying that the wealthy would still pay proportionately more.

The third point is that federal taxes are progressive at the moment. The adjective that goes in front of “progressive” depends on your point of view. It could be “fairly," modestly," "highly," or barely."

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