Should the government raise taxes on the rich?
As people like Elon Musk and Jeff Bezos make more money than has ever existed before, many are wondering whether the rich shouldn’t be contributing more to society by paying more taxes
Rise of the Issue
With the economic turmoils of our times, ideas about how to bring in more money for public spending becomes more pressing for the government. One way to increase the government’s budget is to raise taxes. And while the idea of taxing the rich has been floating around for long, it came back to the fore in recent years, when a Representative from New York, Alexandria Ocasio-Cortez, popularized the idea again as a way to fund her Green New deal.
The debate mainly opposes those who think that the rich should contribute more to society through income taxes because they earn more and it would proportionally be fair, to those who believe that taxing the rich is neither fair to those who have worked hard to earn their money nor efficient as they don’t think it would help reduce inequality.
The Sixteenth Amendment is Ratified
Congress Ratified the Sixteenth Amendment, which gave Congress the power to tax income.
Franklin Roosevelt Creates the Highest Marginal Tax Rate
The top marginal tax bracket is increased to its highest ever at 90%.
Kennedy-Johnson Tax Cuts Enacted
The top marginal tax bracket is lowered to 70% as part of the Kennedy-Johnson tax cuts.
President Reagan Continues to Cut Taxes
Several times during his presidency Ronald Reagan cut taxes, ending with a top rate of 28%.
The American Families Plan
President Biden announces that he is seeking to put in place a new strategy that will increase taxes on the rich to fight poverty, fund education, as well as a national paid leave program.
Proponents and opponents have different views on how fairly the money taxed on the rich would be redistributed, with some convinced it would help those most in need and others concerned that it would not get into the right hands, and instead only fuel an already unfair system.
Those in favor believe that the taxation rate should be proportional to how much money one makes, while those against argue that progressive taxation only incentivizes people to make less or find loopholes.
While some believe that taxing the rich would inject more money in the U.S. economy by allowing more citizens to be able to spend more, others think that it might incentivize the rich to migrate to more tax-friendly countries, with as a result the U.S. losing any share of the most wealthy’s income.
The rich are the group that would suffer the least from increased taxes.
Because the rich have more money, they are also the group that can most easily pay additional taxes that can serve the wider public.
Taxes on the rich can help redistribute wealth to the lower classes.
Instead of traditional means of charity, additional taxes can be used to help support the poor and those in need by funding government programs.
The economy can continue to grow while taxes are raised.
Countries such as Australia, Canada, and Sweden have significantly higher tax rates than the United States and continue to have bustling economies.
The number of multimillionaires and billionaires has greatly increased while the amount they pay in taxes has not.
While there have always been rich people, it is only since the Twenty-first Century that many have been able to create unprecedented wealth while also not seeing their taxes increase.
The gap between the richest and poorest fringes of the population keeps widening.
Because income inequality is becoming increasingly wide between the ultra rich and the rest of the population, taxing the rich on their income could be seen as a way to reduce the discrepancy between rich and poor.
The government wastes much of the taxes they presently collect.
In 2021, the federal government raised $4.05 trillion in taxes while spending approximately $6.82 trillion.
Higher taxes can act as an economic disincentive for people.
When taxes are increased, people are less likely to earn more money or invest in businesses if their tax burden would disproportionately increase, making those who are most likely to create something that makes them a lot of money unlikely to pursue such ventures.
Raising taxes on the rich can lead to market stagnation.
When taxes are raised on the rich and they suspend investing in businesses and production, the gross output of the nation can flatten or decrease, leading to market stagnation.
Increasing taxes on the rich might lead them to migrate.
It is a popular idea that when rich people are heavily taxed, they find other places to live where the taxes are not as high.
The rich can continue to find loopholes to avoid taxes.
Because the rich are most able to hire the best lawyers and accountants to search the tax code to find ways to pay as little as possible in taxes, any tax levied against the rich would likely then be offset by whatever loopholes they may find.