MAKING THE TAX SYSTEM MORE SIMPLE: ON THE PROGRESSIVITY OF TAXES

Various discussions and opened talks among economists wheatear the progressivity really matters for Economic growth and sustainable development, has uncovered some supposingly interesting predications and it gets really cool to see differently advanced economic analysis, concerning the progressivity of taxes. Going through extensive writings and working papers is much more deliverable and essentially effective then listening the leftists and their explosions of neosocialism about how the progressivity of taxes is inevitable. Such a negatively defective way of thinking and considering really has nothing to do with serious "Chicago Economics". So let me turn to the point of the progressivity of taxes and show my own view about it. The Relation between Tax Rates and Economic GrowthEffects of changes in economic growth is a considerable consequence of tax rates. More specifically, supply-side economist Arthur B. Laffer is accredited for offering one of the most convincing explanations on relation between tax rates and tax revenue. The following relation is also called namely "The Laffer Curve". To pursue the facts and correlations above, we need to construct the model of competitive equilibrium with heterogeneity of incomes and tax rates. As to economic growth, the production sector is holding two different sources of Economic Growth. The first source is basically known as "skilled workers" source of growth, while the other one is namely recognized after the portion of skilled labor force, that conducts R&D. Reducing the progressivity of taxes will have a long-running positive effect on changes in economic growth. If tax system is hopefully transformed and progressivity of taxes replaced with single marginal flat tax rate, then of course the progressivity will loose its basic effect on the consumption of human capital. The Flat Tax, namely recently described by Hall and Rabushka presents an experiment of transformation towards the calibrated system of single flat rates of taxes, that indices quantitative effects with an incredible measure of economic efficiency. Also the engine of economic growth has an essential effect on reducing the progressivity of taxes. Seen quantitatively, welfare "subsidies" are undoubtedly higher in the system, where comparative effects reduce the progressivity of taxes and therefore increase the economic efficiency, what actually gives wings to the Economy. In terms of transition costs towards growth equilibrium, more productive individuals rather prefer the system of flat tax rates.Basics and Theoretical ExhibitionLower tax rates increase economic growth. Bob Lucas (1990) applied an endogenous model where human capital is the most central engine of economic growth. In fact tax rates have a long-term quantitatively trivial effect on economic growth. Stokey and Rebello (1995) implied the general model of endogenous economic growth and effective parameters in quantitatively defined direction, where changes in tax rates are oftenly reduced in order to enable the accumulation of human capital and put it into practice. Stokey and Rebello also isolated those effects of quantitative analysis. By implying the "cross country" model of parallel regressions and numerical stimulations, there're considerable influenced implications of taxes on economic growth.Bob Lucas defined that quantitative effects of cutting taxes and reducing its progressivity are present in the model of human capital accumulation, and there's a certain extent on the beneficial and cost side of marginal conditions, known as "decision making". In case of sweepingly established progressivity of taxes, there's a huge influence on the accumulation of human capital. If X in skilled and reasonably productive, then the accumulation of his human capital would increase his purchase power and he'd be tax progressively and therefore he would not be willing to apply larger quantity of accumulated human capital. On the other hand, if the accumulation of human capital is running in the presence of liquidity constraints, then of course the progressivity will reasonably cut the tax burden of the poor, but aftermath the weight of tax burden would be transferred to those who attain high level of productivity and that would definitely present a stoppable effect of putting human capital in practice. Progressive tax rates potentially reduce the consumption of human capital that remains a major part of total factor productivity. The issue of tax progressivity is also a suitable theoretical exhibition. In the OG model, skilled and unskilled workers consume their resources to pay the education for their children. An amount of capable household participants is a key endogenous variable and it presents a value of skills that include endogenously based accumulations of human capital and decisions on the human capital investment. The portion of the workers, employed in R&D attains insightful results on aggregate effects of tax progressivity. Indeed, shifting tax progressivity has importantly implied changes even in specific situations, where the system of tax progressivity is replaced with one single model of proportionally marginal flat tax rate. The welfare under flat tax conditions is not reduced, but furthermore increased, because welfare is in fact an economic agent. The engine of economic growth contains a considerable effect on reshifting or exposing an increased level of the progressivity of taxes, by imposing an external effect and by increasing prices. The engine of economic growth is far more reliable, when tax burden is rapidly reduced, because technological structures will be able to be adopted more easily and dynamically.Writings and discussion, concerning the progressivity of taxes1. Gallorand Tsildon(1997) analyzed important connections of economic mobility, inequality and growth in the general model of capable heterogeneity. Gallor and Tsildon applied the linearity of the human capital function at the same spot in order to simplify the process of aggregation.2. Caucott, Imrohoglu and Kumar (2003) used a simple limit of twin-tracked heterogenesis in order to make the system of aggregation of the human capital more capable on responding to different effects of changes and reshifting shocks, that were primarily described by Andrade (1998).3. Uhlig and Yangama (1996) built the heterogenesis into Overlapping Generations model (OG Model), putting an argument, that shifting outcome capita. tax rates will enable young people to put an emphasis on saving, ahead.4. Blackeneau and Ingram (1999) considered the taxation of differently skilled workers at different tax rates, because there's also "so called " "skill-biased technological change". Blackeneau and Ingram charactirzed specific condtions of the influence of taxing older population according to higher tax rate. This method increases saving of those, whose personal incomes are taxed less, according to reshiftings in tax progressivity. The final effect therefore remains the increase of skilled labor on the labor market. In the following terms, the progressivity is implied functionally through physical capital. Blackeneu and Ingram put an emphasis on the relation-type condition between "capital" and "accumulation", arguing that the whole process holds a secondary imposed role, because the progressivity is reflected directly upon the capital return rate and has a negative effect on the supply of skilled labor. Blackeneu and Ingram hadn't faced the model of endogenous growth.5. Cassou and Lansing (2000) emphasized the local concept of migration regime and the system of marginal flat tax rate according to response functions of growth effects of shifting from progressive towards flat tax rate. Lower progressivity therefore increases the supply of productively skilled labor force, output, investment etc. Cassout and Lansing argue that untaxed earnings present the largest input of the human capital production in increase. They solved a special representative model and configured the progressivity with certain specification of tax rates as an increasing function of income. To understand the implicit inequality, it's central to conduct the scale-model of inequality explicitly separated.6. Caucott, Imrohoglu and Kumar (2003) resolved a special model of specific heterogeneity as a model agent, where inequality is developed according to the process of endogenous concept of capital. Such model can contain certain exogenous shocks of the recent effect of progressivity and premium precise, while representative model is not capable of conducting such issues properly.Calculating the effects of growth on progressivity by imposing a marginal condition (Lucon, 1990) is very similar to some explicit extent. The effects of change are important and require reduced or eliminated progressivity, which should be permanently replaced with the model of one single flat tax rates. But more concise research is reflected upon the model of fully-specific heterogeneous agents.