Tax Equity in The Rich and Poor

Introduction

Every government imposes taxes on its people either directly or indirectly. These taxes are in the form of levies such as income, estate taxes, and capital gains, which are imposed on citizens of a country involuntary. Many governments tend to overtax their citizens, but provide very basic services that is not very beneficial to the citizens. This makes many citizens feel like they are being extorted by the same government that swore to protect them. However, this is not the same case across every government since there are some government systems that try to be fair to their citizens and deliver affordable services.

Body

The argument of this paper is that both the poor and the rich should be taxed equally. In my argument, the rich should not be taxed more. The main issue around taxation is what counts to fair taxation. Different arguments have been posed on trying to find the best solution on who should pay taxes and what criteria should be used to determine what one should pay. Since we have two groups in the society, the poor and the rich, it’s always hard to strike a balance between them on matters to do with taxes. Whether the rich should pay more taxes than the poor or whether the two groups should pay the same amount of taxes.

“Some believe fairness requires taxing the rich to help the poor, while others believe it is unfair to tax away money people have earned through their own efforts” (Sandel, 2009). Theoretically in many tax systems the more you earn the more you’re taxed. This brings a feeling of over-taxation on people who earn more. However, those with less income are always comfortable with taxation since less is taken from them. So, in addressing taxation inequality, it’s quite hard to find a common ground since one’s financial situation seems to determine a person’s opinion on the case. According to a research carried out by Pew Research Centre, many governments were faced by opinions in regard to taxation whether to lower taxes for the rich and encourage economic development or raise taxes for the rich and support programs for the poor. I believe it’s not fair to overtax the rich because and the government should come up with other avenues of supporting the poor.

Tax Equity in the Rich and Poor

The rich should be allowed to enjoy every penny they earn without being extorted with taxes. What one earns should not be excessively taxed and redistributed back in society to support the poor (Herings & Predtetchinski, 2011). This will introduce hard work in every citizen and make the lazy realize that the only way to success is through hard work and not depending on the government.

Despite the fact that a flat tax may seem to enhance fairness by requiring that all taxpayers should pay taxes under the same rate the flat tax still taking more from high-income earners. Some tax rates are already too high therefore, there is no need to increase the tax percentage on the rich because such unreasonably high tax rates for the rich are bad for any economy. According to (Vitelli, 2019), “Before the corporate tax reduction, other countries had a competitive advantage over the US when looking to attract businesses.” This is due to the fact that too much tax reduces morale for business.

Some of the reasons as to why the rich should not be taxed more are: Most of the government have not been using their tax resources in the best way they could, and the citizens don’t really know what exactly the government is doing with their taxes. There could be wastage of taxpayers’ money on unnecessary government spending, so there is no need to increase taxes if actually the government is not using the tax money in a useful way. Also, higher taxes slower economic growth since citizens want to be taxed based on their abilities, higher tax rates are seen as a failure which leads to economic stagnation. Cutting taxes improves revenue because when taxes rates are cut people tend to invest more without fear, which increases overall revenue. On the other hand, increased taxes make investors alter their spending in order to avoid or reduce tax payments therefore, this decreases revenue. Furthermore, higher taxes reduce money supply, which leads to less investment and in turn loss of jobs and unemployment. This pushes the economy down and the government cannot even generate enough revenue to sustain its people.

Counter-arguments

However, not everyone is of the view that the rich should not be taxed more. The opponents of this argument claim that the rich should pay more taxes. This will help the government raise enough money to provide services such as security, housing, education and healthcare, which are needed by everyone. Most governments depend highly on taxes and if people push for low taxes rates even for the rich, the government will not be able to help the citizens who need help. Therefore, it is reasonable to tax the rich more since they hold so much in the economy. This section will explore some of their arguments as to why the rich should be taxed more.

Economically, it makes sense to tax the rich more since the government is able to support the poor, increase country security, and begin development projects which at the end serves all its people. This makes sense because when rich people are taxed more the government will be able to develop the country and help poor people with their daily life needs.

Another way of redistributing this wealth is by providing a tax cut for the middle class. Based on the work of Vitelli (2019), “tax hikes often do not have the intended effect of raising more revenue” (Vitelli, 2019). When tax hike is imposed on the rich it does not affect them adversely since most of their income goes to saving. Furthermore, “Some philosophers who would tax the rich to help the poor argue in the name of utility; taking a hundred dollars from a rich person and giving it to a poor person will diminish the rich person’s happiness only slightly, they speculate, but greatly increase the happiness of the poor person” (Sandel, 2009). Even though high taxes does not affect them it is not fair increasing the tax on them.

According to Goodman (2011), “Taxing the rich can also be justified on moral grounds if it is used as a form of wealth redistribution.” Generally, the rich have too much and it would appear fair enough to take more from them in terms of taxation. Some of the richest people in America wealth can equal thousands of poor people wealth. This shows that the rich should be taxed more since they have a lot of money in order to support all classes and also help the country develop.

Even if high tax rates are imposed on the super-rich they will still be fine. Some of the billionaires are willing to be taxed more so as to support the country’s economy. The U.S government is needed to provide a lot to most of its citizens in the form of basic housing, education, food, and healthcare. The government must raise this money from somewhere. Therefore, the rich should be willing to pay their rightful share of tax (Vallentyne, 2018). Despite the fact that some may argue that the tax rate is high, this is not the case since recently the new tax rates for America favored the rich by lowering their rates by 1-4%.

Some of the reasons as to why the rich should be taxed more: the government is forced to look for more money in order to sustain its growing expenditure thus it’s wise to impose higher taxes on the rich since they can afford it. Also, the government should tax the rich more to ensure wealth redistribution thus enhancing social stability. Furthermore, provide money needed in order to pay for education, security, and health which must come from somewhere.

Conclusion

Despite the wide range of arguments by the opponents who support more taxation for the rich, I still hold the claim that the rich should not be overtaxed. Both the rich and the poor should be taxed equally for the following reasons: the fair taxation offers an opportunity for both groups to work extra hard with an aim of increasing their salaries thereby contributing to an improvement in the country’s economy.

Unfair taxation can discourage the rich and force them to maintain their salaries since they do not see the essence of working hard. According to Sandel “ if you are taxed, you can always choose to work less and pay lower taxes” (Sandel, 2009). The rich consider it to be a loss getting high salaries and still losing large amounts to the government through taxation. It becomes worse when they realize that the poor are paying little or no tax. In most cases, it’s the fault of the poor to be in the situation they are in therefore, those who have sacrificed their time in attaining success should never be discriminated through taxation. Everyone must pay his/her rightful share of tax to the government in order for the country to grow.

In conclusion, the government should continue to tax its citizen in a reasonable way in order to support its spending on social services such as education, infrastructure, healthcare, and food security. Every citizen should have access to those services in order to live a better life. However, the government should also come up with more ways of raising their revenue through license fees, fines, and other productive ways.

References

• Goodman, P. (2011, September 30). Should We Tax the Rich More? (Pros and Cons). Retrieved from https://soapboxie.com/government/Should-we-tax-the-rich-more-pros-and-cons
• Herings, P. J., & Predtetchinski, A. (2011). Procedurally Fair Income Taxation Schemes. SSRN Electronic Journal. doi:10.2139/ssrn.1890464
• Vallentyne, P. (2018). Libertarianism and Taxation. Taxation, 98-110. doi:10.1093/oso/9780199609222.003.0006
• Vitelli, A. (2019, April 16). Should we raise taxes on the rich? Retrieved from https://www.theperspective.com/debates/businessandtechnology/raise-taxes-rich/
• Sandel, M. (2010). Justice : What's the right thing to do?(1st pbk. ed.). New York: Farrar, Straus and Giroux.