I would assume that governments estimate the amount of extra money they need to finance public healthcare, pensions, infrastructure improvements, etc. They make the projection for the coming years, add some safety gap on top and then calculate the tax rate based on this required amount of extra income. Is that true?
If so, such calculation leads us to a flat tax rate. If we are talking about a progressive tax, how are the decisions about tax bands and rates for each band made?
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in texas that is exactly how property taxes work. The taxing district determines the value of all properties. Each taxing entity (city, school district, county etc) determine their budgets. Then they set a tax rate that raises the money the budget requires. The property tax rate fluctuates every year. As the value of housing rapidly increases the tax rate often goes down even as budgets increase.
State and federal govt dont do this. Tax rates dont change often and are simply set by laws. Instead the federal government sells debt (treasury bonds) to raise funds and the federal reserve and government agencies like the social security administration buy that debt.
State governments can also sell debt, but they tend to be somewhat more fiscally responsible because they cant just print money to pay their debts.
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