If almost half of all taxpayers benefit from an efficient federal tax rate of zero per cent, then there must be defined minimum taxation that all individuals must pay. The minimal rate must be calculated in relation to the various economic levels. However, the minimum tax ought to be imposed only if the person has an effective tax rate of zero per cent after deducting and crediting (Drake et al., 2017). Marginal rates are often used to determine the amount of tax owed by various payers. Furthermore, the above rates fluctuate based on the amount of money produced. The taxpayer may occasionally obtain an effective tax rate of 0 per cent. This can happen if the taxpayer has claimed deductions, rebates, or lengthy capital gains.
It is now projected that over half of all taxpayers have an effective rate of 0 per cent. This is a severe worry in the economy because just the top 1% of employees are deemed to generate more than 90% of all levies (Drake et al., 2017). To address the issue of tax evasion, a minimal federal tax rate that applies to all earners should be implemented. Thus, implementing a minimum tax rate may be difficult, particularly in nations with progressing taxation systems. This is due to the perception that it would be unjust to specific payers. Thus, the basic minimum tax rate should be proportional to income levels to alleviate the worries mentioned above. Nevertheless, the tax should only be levied if a person has taxation of zero per cent after subtracting and crediting.
The above scenario indicates that taxpayers with marginal tax rates higher than zero would be excluded from such a levy. A minimal tax rate of 2%, for instance, is generated for taxpayers with substantial income but a taxable income of 0%. (Drake et al., 2017). As a result, the minimum tax would be constructed as an optional tax that would be activated for persons who generates a considerable level of income but at a 0% rate of taxation.
Reference
Drake, K., Hamilton, R., & Lusch, S. (2017). How do effective tax rates vary across firms and time? Insight from effective tax rate reconciliations. SSRN Electronic Journal, 1-71. Web.