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In many countries, the "top rate of tax" is still highly controversial. Do you find the...

In many countries, the "top rate of tax" is still highly controversial. Do you find the arguments for lowering the tax rate to be persuasive? Or raising it? Please describe the macroeconomic theories behind your answer.

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Answer #1

In many countries, rate of direct taxation ( those taxes which are mainly impose on income and wealth like Income tax, Capital gain tax ) is still high because direct tax is progressive in nature. Direct tax is mainly impose on high income group people and it does not effect the lower income group people. These amount of taxes are used for the welfare of economy, as we all know that, the main source of financing various government developmental programmes are taxes. So for maintaining growth of an economy, tax rate should not be 'lower'.

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