Progressive Tax and Estonia

 Article

http://balticbusinessnews.com/article/2011/2/21/experts-estonia-should-not-rule-out-progressive-tax

Summary

Foreign and Domestic economic experts believe Estonia shouldn't rule out the possibility to introduce a progressive tax under certain conditions. One economist named Stuart Adam states "Overall, a flat rate of individual income tax has no advantages in itself. It is also restricting the way the government can re-distribute tax revenues." The biggest reason for use of a flat rate is that its simple but it comes with a big disadvantage by reducing work motivation and affects economic growth. Another ecnonomist Viktor Trasberg believes progressive tax will help the state collect a larger amount of revenue and decrease tax burden on low income owners. Progressive tax may also stabilise the economy because people are paying less taxes. Bert Brys a OECD tax economist also says that before Estonia considers progressive taxation, it should revise its tax exemptions because "Usually the case is that the rich will get more benefit from various tax exemptions related to housing and pension saving costs" and Estonia may need to sacrifice some economic growth for equality.

Connection
This relates to Chapter 4 because it shows how a progressive tax can be applied in real world situations and of the advantages it may have over flat tax rates. I believe that a progressive tax would be good for a nation like Estonia due to the fact that it can close bridge between the classes and give the citizens a more equal standard of living instead of having extreme situations. This will also help stabilize the economy and I feel the advantages outweigh the disadvantages in this case.

Reflection
The only disadvantage mentioned in the proposal of a progressive tax is that it will be more complicated then the simplicity of a flat rate tax which would tax everyone the same amount without taking into consideration any other factors. This is why I feel a progressive tax should be used because it is more developed and thought about then the flat tax rate. It provides an equal advantage for everyone in the country to live their life comfortably without having to worry as much about taxation.