High Income Tax Rates

As we all know that high rates of income taxes on individuals as well as organization and companies are affected in both ways. Personal income taxes regularly impose the continuous learning of the individual, at the same time as corporate tax usually taxes net profit of the company. Different tax systems are present, with changing degrees of tax incidence. Income taxation can be proportional, progressive or regressive.

While revenue has been the key source of income for the majority government in the world as overall, high-income tax rate has both advantage and disadvantage to person and companies as well.

Death and taxes, both certainties of life have their downsides. Income tax fulfills some significant functions in society. In addition to giving the government revenue with which to manage the country's affairs, the charging of taxes can also be used to discourage and encourage the growth of certain industries.

Yet, there are some main disadvantages to the high tax rate. The problem of high tax refers to all disorder brought along by large fiscal matters within society either indirectly or directly. The disadvantages of high taxation consist of the following:-

Decreased purchasing power:

Income tax especially when the rates of income tax are high has the tendency of dropping the disposable income of an individual which consequently reduce the purchasing power.

Discourage saving:

Since the fact that high-income tax rate decreases the disposable income of an individual, this means a unique capability of saving will be reduced not totally stopped from such habit, therefore, preventing the individual from performing other economic activities.

Discourage Business

When taxes increase, the individuals, as well as companies of a nation, pay more to the government from their income. This can produce a disincentive to spend in business, as investors will automatically receive a smaller out coming on their investment. In turn, companies may be discouraged from growing, as a high tax rate will shorten the profits they build. This discouragement can have a lot of terrible effects on a country associated with the retardation of its economy.

Conclusion:

In a nutshell, it is also noticeable that without paying income tax, corporate and personal profits would be out of control and not to be regulated. Corrupt individuals and greedy corporations could get heaps of ill-gotten money, because they would not have to account for their revenues. But also, in other hands high taxation decrease the purchasing power and savings of the individuals. Business can be discouraged by high taxation.