Solís proposal is regressive tax

Dear A.M. Costa Rica:

In your coverage of President Solis’ tax proposals (a value-added tax plus taxation of worldwide income) you mentioned that the value-added tax comes under criticism for the extra paperwork it entails and for the perceived negative impact upon production. What you failed to mention is the most damning consequence of a value-added tax, or any flat tax, upon people of limited financial means.

While any flat tax impacts equally (in percentage terms alone) upon everyone, such a tax leaves those with few resources with less to live on post-taxation.

Imagine a family with an annual income of (say) $12,000 who pays 10 percent of that in taxes. They would be left with $10,800 to meet their living expenses.  Imagine a second family with an annual income of (say) $120,000 who pays the same tax rate. They would be left with $108,000 to meet their expenses.

Clearly, the poor suffer more under any flat tax system and that is not consistent with Costa Rica’s general public policy.

David C. Murray
Grecia, Alajuela
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