Which plan seems the most fair to you? Which plan seems the least fair to you? Why?. Then compute the effective tax rate for each plan relative to discretionary income rather than income. For each income group, estimate their essential expenses, and calculate their discretionary income. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally. Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. There is no one right answer here – just make sure you bring in enough money! Set progressive tax rates for each income group to bring in enough money. For simplicity, we’re going to assume that a household is taxed at the same rate on all their income. The third proposal we’ll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. Determine what flat tax rate would be necessary to collect enough money in this modified system. Determine the total taxable income for the whole population. 
Everyone in group B will pay taxes only on $9,000. So, everyone in group A will pay no taxes. The second proposal we’ll consider is a modified flat-tax plan, where everyone only pays taxes on any income over $20,000.
Determine what flat tax rate would be necessary to collect enough money. Determine the total income for the population (all 100 people together). The first proposal we’ll consider is a flat tax – one where every income group is taxed at the same percentage tax rate. We are going to determine new income tax rates. This scenario is roughly proportional to the actual United States population and tax needs. Group F: 5 households that earn $295,000 each Group E: 15 households that earn $129,000 each Group D: 20 households that earn $79,000 each 
Group C: 20 households that earn $50,000 each Group B: 20 households that earn $29,000 each Group A: 20 households that earn $12,000 each The federal government needs to collect $800,000 in income taxes to be able to function. Imagine the country is made up of 100 households. Project 1: Flat tax, Modified Flat Tax, and Progressive Tax The following two projects will allow you to explore some of these ideas and draw your own conclusions. Others call for revisions to how different types of income are taxed, since currently investment income is taxed at a different rate than wage income. Some, for example, have claimed that a flat tax would be more fair to all citizens.
Many people have proposed various revisions to the income tax collection in the United States.
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