Taxes

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Taxes is one of the most common way that government used to control their economic system. Based on the different propose and government structure, governor will choose different types of taxes system. All taxes can be sort into three different types, the proportional, the progressive, and the regressive.

Both in China and the U.S, proportional tax is known as “Flat Tax” since it is a fix percentage of one income. According to the website Worldwide-Tax, Chinese government have used proportional tax system in the business income taxes and it is taxing the business about 25% of their total income. Based on the government structure of China, governor set a taxes rate that lower than U.S seem reasonable because China government needed a higher grow on their economy and the 25%  tax rate can give government enough control of the money flow in the economy. When the a economy collapse, the value of currency in circulation will inflate which in the buy-force of one unit of currency is decreasing. Eventually, it will lead to a bigger collapse and went out of governor’s control. However, the lower rate help the business owner gain more over years and that can get more time to the owner to react which can significantly limited the collapse. Differently, U.S did not used proportional tax system that much.

Furthermore, both U.S and Chinese government have use progressive to model they income taxes, the biggest tax income for the government. But, the income taxes for U.S is much higher than Chinese. According to the Worldwide-Tax, China have a 3% on 0 dollar to 222 dollar, 10% on 222 dollar to 666 dollar, 20% on 666 dollar to 1332 dollar and every 5% for each level. The top level on Chinese income taxes is 45% on 11840 dollar and above. Based on IRS’s reports, U.S The Federal income tax currently consists of 7 rate brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Compared Chinese to U.S income taxes rate, Chinese government have a higher taxes control over higher class and less over the lower class which help the economy system more stability because the lower class will not cut back much in their daily expense while a financial crisis and that will lead to the cash flow in the economy system will not change that much; Unlike China, U.S government have a less taxes control over the higher class and that can lead to a fast growth economy by giving more money to the higher class to invest. However, the economy will not as stable as Chinese since the higher class can easily cut back the daily expense while financial crisis and the cash flow in the economy system will significantly decrease which will cause an increase of the unemployment rate. This is what happened during the 2008 financial crisis.

Beside those, both country use regressive taxes system for the sales because it is based on the benefit receive. When people buy more, they need to pay more in taxes. However, this is not totally true because the poor will not have the chance to buy thing when they were for sale based on their financial situation which mean most of the poor need to pay full taxes for the daily spending; the rich will more likely to have the money and supplies to buy the thing on sales which mean they can pay less on taxes on the same item.

Although the government structure of China and U.S is totally different, they have use the similar taxes system because of the fairness. But they have a bit different on each taxes system because their stage of the country and their government needed.

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