One of the actions taken by states is raising taxes on the wealthy to help reduce the deficit that affects their country. People pay taxes every day to pay for everything they need it to do, this could be for the purpose of having good schools, good roads, good bridges, an effective national defense and everything else that the government is expected to provide. One of the formidable lessons that one gets from economics is that incentive matters. All citizens ought to be motivated to pay taxes to pay for different public services which they all depend on. Raising the question of whether the wealthy should pay a higher percentage of their income in taxes is controversial and probably the most central empirical issue in the financial sector. The issue has attracted a centerpiece of the vehement and daily debates about the tax policies.
The essential view held by Reich, 2013 is that lowering taxes and letting people keep more of their dollars earned will make them want to work even more. His sentiments are that the higher the wages, the higher people work. Seemingly to the thought of it a majority of the rich people did not just get to their positions by winning a lottery ticket. They must have worked extremely hard and taken risks to get to their position. To that extent raising taxes for the wealthy might just discourage work to the top income earners. The economic Laffer curve helped depict that an ideal tax system should be light in its burden to everyone.so that it cannot discourage the activity of tax payment and artificially induce people into uneconomic behavior, the curve stipulates that when the tax rate is high workers will have no incentive to work. (Arthur 2011) According to the sentiments of Mitt Romney, the former Governor Massachusetts indicated the following on his campaign website page Tax: Fairer, Flatter, and simpler, Mitt Romney is a conservative American who believes that to the extreme level citizens should be in a position to keep what they have rightfully earned. The concept of raising tax as I view it would be the bureaucratic government eliminating the famous Robin Hood who was depicted as robbing from the rich and later giving it to the poor.
The affluent people in the society might be increasing their wealth daily while paying fewer taxes that should be used in supporting education system and job creation. The wealthy are definitely in a position to pay more without a big impact on their gross income. The United States of America, for instance, has one percent of the richest people who could be taking home a greater share of the whole countrys whole income. Reich envisages that the richest Americans who are about 400 are wealthier than 150 million Americans combined. The rich have the large sum of their assets sitting in deposits which means they have a little investment that may benefit the nation at large. This is in comparison to a person stuffing his money into a mattress which essentially a lot of means a lot of wealth is wasted. Putting a higher percentage of tax to the wealthy should solve the hurdle of economic inequality.
The tax paid by the rich if put into the hands of the poor who are the majority will see money being spent faster creating immediate economic benefit. The 44th President of united state Barack Obama on his remarks during December 6 2011 speech remarks on the Economy, stated that the wealthiest Americans have been paying the lowest tax in over a century. Some of the billionaires are noted to have tax low rate as minimum as 1% which stipulates the height of unfairness that a constructive worker should pay a higher rate than an individual earning more than &50m. Reich makes an observation that raising taxes on the affluent will not have a negative impact on the economy. He observes that after world war 11 the taxes on the rich were much advanced which led to the growth of economy faster than it has ever since. A company which has more wealth with fewer employees makes it hard for citizens to afford products sold with a company having many employees. Raising tax on the rich would just be common sense in handling economic inequality.
We should all be in a position to conquer that increasing tax revenue and reducing the government expenditure is formidable in reducing the federal state deficits. It is more reasonable asking the rich to fund government expenditures, but an issue raised is when the rich are handed in a bill that makes them provide these funds through an increase in their taxes. Economic inequality goes further to income inequality which probably the wealthy can easily afford to bear a large burden of the states tax burden. Hubbard however, holds that increasing tax for the wealthy is uncouth, unnecessary and counterproductive. He stipulates that the rich are already paying for more than a half of the all federal taxes and increasing their tax will not help raise more funds to close the deficit gap. Laffer further envisages that it is impractical to tax an economy into opulence. According to him, there is much evidence to show that lower tax rate can be linked to strong economic growth. During President Ronald Regan era, he was able to change the trajectory of America by creating the famous Reaganomics which entirely worked in reducing the government expenditure and reducing the federal income tax which saw a drop in the level of poverty among the Americans.
To that extent increase of the tax or lowering tax can be a solution to the economic inequality that exists, but the major issue that should be sorted is the loopholes that exist in tax payment. The legislatures should be at the forefront in ensuring a level playing ground is created where all face the same advantages and risks at the same time. Equality is a fallacy if we expect the rich and the middle class to pay the same rate of tax or some who are rich paying even lesser. There should be a situation where the more one makes the more they consume and the more fair tax they pay.
Reich, Robert B, Lott, John (2013) should the rich pay higher taxes. New York Times Upfront.
Reich, Robert (2010) the rich get richer, everyone else gets poorer, and the democrats punt. Catholic new times.
Arthur B. Laffer (2008) thinking economically Texas policy foundation retrieved from http://www.laffercenter.com/wp-content/uploads/2011/04/2008-TE-Lesson9-posting.pdfOSilluvan A. (2011). Urban economics. Boston: McGraw-Hill.8th Edition.
Mitt Romney(2012) www.mittromney.com tax: fairer, flatter, and simpler.
The Washington Times (2012) Rich must pay more taxes, Obama tells voters. By Susan Crabtree and Seth McLaughlin. Jul 11, 2012.
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