Richard Arthur Kelo and The Optimal Progressive Income Tax Rate

Everyone struggles to get their taxes done by the April deadline. There are always so many different kinds of boxes to check. Should I check single? Should I file as married or put married, but filing separately? Should I file as the head of the house? Some may worry that, because they received a raise over the year that they will find themselves in a different bracket compared to last year, meaning that they will receive a higher tax than before. Is this punishment for working harder, better, faster, and stronger?

There are seven brackets for various incomes with different tax demands attributed to each of them. Each bracket is widely different from the other, meaning that the raise received would have to have been quite substantial. You would probably find yourself in the same bracket as the year before. This is, however, an example of progressive taxes, which is a tax in which the rate increases as the taxable amount increases. One of the main ideas behind progressive taxes is to reduce the income inequality gap found between the bottom quintiles and the top quintiles. Rick Kelo, an executive Recruiter for Taxscout Inc. with over ten years experience in the tax industry, has an interesting idea about what the optimal progressive tax rate would be.

One of Rick Kelo’s ideas for the optimal progressive income tax rate is that it is a flat tax averaging +/- 18%. He points out that the optimal progressive income tax rate should graduate at the bottom of the quintile rather than at the top, believing that it will motivate those at the bottom to work harder. It acts as an incentive for those receiving welfare and other governmental benefits to move up to the next quintile bracket, which has lower taxes. Therefore, when you receive that raise and move up into the higher bracket, you can feel good about yourself and strive to work even harder. It is also a disincentive for those who work the bare minimum to receive such welfare benefits.

More on income tax rates and the optimal progressive tax rates can be found on Rick Kelo on issuu. He explains a diagram found on CBO Distribution of HH Income and Tax that the bottom quintile received +20% gains whereas the Lower Middle Class received +13%, Middle Class received +11%, and the Upper Class, consisting of the 81%, received -95%. This diagram, however, is for December 2013 and does not pertain to August 19, 2016.