This article discusses the idea of increasing the amount of taxes that the wealthiest Americans pay. It begins by discussing how in some European countries (such as Britain), the rate at which the richest are taxed has been greatly increased in recent years. It then moves on to discuss whether or not the United States should do the same thing.
The article points out that a blunt increase in the tax rate leads to less entrepreneurial risks taken, as well as the rich moving, working less, or shifting their income into less-taxed forms. While it gives reasons for increasing the tax on the richest Americans, it argues that it cannot just be an increase in the tax rate they pay. The article suggests that eliminating tax deductions is the method that should be used, saying that since these deductions go mostly to the rich, they end up paying more but since it is not an increase in the tax rate, the negative effects mentioned above will not happen.
This article brings to light some problems that the new tax plan could cause. However, I think in the short run it will help the economy. I am in support of the higher taxes for the wealthier because they can afford more than the middle class can. Wealthy people have more disposable income however, as a class they don't have the purchasing power like the middle class. The middle class is greatly effected, negatively, by a tax increase, the wealthy will be effected in a negative way, but it won't be as great as if it was the middle class getting the increase. The economy will be effected but in less of a way then if the middle class was to have a tax increase.
ReplyDeleteI liked the author of this article a lot. I think his suggestion that “fair” and “unfair” are subjective and that jumping to increase taxes based on what is “fair” would be folly is solid advice. Deciding tax policy based solely on one political ideology is likely not going to be best for the economy. Like the author says, instead of playing politics governments should look at making smart economic policies, for example like cutting spending and/or making the tax system more efficient.
ReplyDeleteGreat article except for his dogmatic recitation of a by and large unfounded assumption: taxing the wealthy leads to less risk taking and lowered productivity. This is a by and large unprovable assumption and moreover does not intuitively make sense. People are motivated to maintain or improve their standard of living and to be able to view themselves as successful in their particular field of endeavor. Taxes don't effect self worth and if one's standard of living is threatened through taxation we would expect that person to work harder to maintain that SOL not less.
ReplyDeleteRisk-taking in and of itself requires extra money... Intuitively, if you had an extra cash of 1000 bucks in Vegas, you'd go for it. If you suddenly needed that money to pay for your trip back, then you'd probably play it safe...
ReplyDeleteIt is also true and can be observed through current GDP growth rates that countries with more income equality in developed countries also grow at a much slower rate. This is because the richer tend to invest while the middle class tend to consume. Investment, again, comes with extra money. If you take out that extra money, then that much money does not go into investment.. People usually do not forgo consumption to invest.
I did like the article, but I am also suspicious about how simple it is. A lot of these deductions have a purpose and its effects cannot be discounted. The author just can't claim that his plan will not affect the dynamic of the economy.
Hopefully a tax plan that increases tax revenue (from the rich) and a spending cut that decreases wasteful spending and increases the efficiency of some welfare programs, will be agreed upon soon..