Claire Fernandez
Taxes are now and have always been
a huge issue surrounding economic and political discussions. There are some that argue that the rich don’t
contribute enough and there are many others that argue that it is the duty of
the rich to contribute more because, simply, they have more. In the United
States, for income taxes, we have a progressive system, which requires the
wealthier to pay a larger portion of their income to taxes than a poorer
family. This does two things for the
American economy as a whole, it acts as a built in stabilizer in which
expansionary or contractionary fiscal policy can occur without any direct
interference from the government and it also acts as a way to redistribute
income as the tax dollars collected may be spent on welfare programs as well as
programs that aid society as a whole.
But, back
to the argument as to whether the rich pay enough of their income to qualify as
contributing their fair share. According to CNN Money, the top income receivers
contribute an overwhelming majority of the taxes used for things and programs
that they use equally or even less than their less wealthy counterparts. In
2010, the top 10% of the United States contributed 70.6% of the federal income
taxes collected. This is an extreme increase from less than 15 years ago in
1986 when the top 10% carried 54.6% of the federal income tax burden. It was
also noted that 47% of Americans contribute little or nothing to federal income
taxes, leaving the entire tax burden on a little more than half of the country.
Although the top 10% take on 70.6% of the tax burden, they only receive 45% of
the nation’s income. This point is the main argument in that the rich are
taking on more than their fair share of taxes going to programs that may not
even be benefiting them or their general community.
The
argument countering this is that there is a point at which an excess of money
is accumulated. One only needs so much to live on and therefore the value of
the money earned by lower income receivers is more than that of higher income
receivers. Over the past few years, salaries and wages of low-income workers
have barely been able to catch up with inflation and the majority of income
gains, where there are any, are given to those at the top. Therefore the
argument for a more progressive tax system lies in the argument that while the
poor are remaining relatively the same, the rich are getting richer. The United
States has relatively high income inequality to begin with, with a Gini Ratio
of 0.45 (0 being perfect equality and 1 being absolute inequality) and many
believe that it is the countries best interest to lower that through taxes and
it is the duty of the nation to provide for all in any way that they can. Also,
the progressive federal tax system is offset slightly by the less progressive
state income tax system and even regressive sales tax.
Therefore, in conclusion, it is not a matter of setting a
flat tax rate versus the progressive system that is even part of the argument
as the benefits and stability of a progressive system are needed. But, it is a
constant argument as to whether the progressive system is progressive enough.
This argument cannot be solved economically, necessarily, because it is based
mainly in the ideology of the people. Views differ extremely between various
democrats and republicans, except in that no one really likes taxes but in the
end their necessity renders them worth wile.
Claire I like how you brought up the different arguments that much of our country is arguing about these days. The idea is we most likely have to have a progressive tax system, it is just the severity of it that is arguing about it. Having a flat tax rate would still allow for the rich to pay more than the poor do, monetary wise, they just have the same tax rate. Having the progressive tax rate allows for built in stabilizers because as you make more money, taxes are higher, and as you make less money, taxes are lower.
ReplyDeleteClaire, very well done. Your ability to show and argue multiple sides added a great deal of value to this piece. I'd just like to reflect on the part where you talk about the poor staying poor and the rich getting richer. We can both attest that this is an argument that is used quite a but today. I agree that this is seemingly the case but I think we are too quick to dismiss the fact of human capital. People are neither poor because others are rich, nor are people rich because others are poor. In that context, it may make more sense to use a less progressive system.
ReplyDeleteFirst and foremost, I found your article very insightful. I though the way you contrasted this idea between the two sides of the argument was intersting. I tend to agree with the statistics at hand. While the federal government constantly states that the rich don't pay their fair share, why don't they look to the people who pay nothing. Although I do agree that the rich should pay more I think it would be a good idea for the percentage they pay to stay the same. For example, a person making 50,000 dollars let's say pays 20% of their income in taxes and so does a person making 200,000. Though some would disagree and say that the rich rich should pay a higher percentage their already paying in this example 30,000 more in taxes. People would then say that the purchasing power of the person making 50,000 would be lower than their counterpart making 200,000. However, again I would disagree and say that although they are making less, the amount they like have to pay to have a "comfortable living" is probably less as well.
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