Taxes on the wealthy should be higher essay:

There is a debate among some circles about what obligation if any the wealth have to help in improving the economy for everyone else with respect to tax contributions.  Some argue that tax cuts for the rich help them to create more jobs and to innovate through their businesses in the economy.  However, an analysis of the present economic environment reveals the problem with this concept. The current tax rate in the United States is significantly lower than it was during the  1940s and 1950s  however,  contrary to the  arguments that the reduction in tax rates  would  bring about  economic  growth,  analysis has  found that this  has not really been the  case, rather  the lower tax rates have resulted in serious wealth disparities in the United States  with the top .1% of people controlling significantly more of the country’s wealth (Hungerford, 2012).  Based on these figures, tax cuts on the wealthy do not benefit the larger economy and therefore taxes should be increased. The wealthy have an obligation to help other people in their country because they did not become wealthy on their own. This can be accomplished by charging wealthy people higher taxes which will stimulate  employment, increase  business  investment  and create  a better economic  environment for the  entire  region.

Wealthy people became  wealthy because of the larger economy and they have a responsibility to  give back to the community that made them  wealthy In the  first  place,  although  very  rich people are  much  fewer  in  number than working or  middle also,  they make up a  much  larger  proportion of the tax base. Wealthy people make up a very sizeable proportion of the tax base.  Even  in  1993, a  small group of  executives at the  top can have the  equivalent tax  effect of the next  one million people with one  person even  counting for as  much as 2% of the change  in rates (Goolsbee, 1997). There is  evidence to show that the  current tax  system favored by the  United States which Canada may  follow is  actually  more  beneficial for rich  people that it  is for  poor people. According to Niman (2011), the tax system favors the wealthy by giving the many benefits and incentives such as tax free loans and bailouts which are not available to the poor, working and middle class.  The unfairness of this system is become very apparent with growing income equality within the developed world. Even when the  government  takes steps to try to get wealthy people  to pay more  in taxes they avoid it so that they  do not pay as much One of the reasons that high income  people  might be able to save more  of their  income is because they get  more of their  money from  investments and  self-employment  which gives them the  ability to  hide this  money from tax  collection services (Feenberg & Poterba, 1993). This suggests that government needs to take strong steps to collect taxes from the few wealthy people who are putting more of their tax burdens onto the poor.

Taxing wealthy people more than anyone else:

Wealthy people need to be taxed more than anyone else because it helps to increase employment while cutting taxes does not help employment and actually harms future job prospects. At present,  although  companies argue that they  need more tax cuts because they are job creators and taxation prevents them from hiring more workers due to  pressure on their  profit margins, in reality  companies are actually taking  much more  out of the economy than they are  paying back  in employment. For example, between 1983 and 1999, the profits of   the largest firms grew about 362.4%, the number of actual people employed only grew about 14.4%. This is because companies are actively keeping their labor costs down by hiring contractors and staying very flexible (Anderson & Cavanagh, 2000).Charging wealthy people higher taxes makes sense because it  prevents them from hoarding  money that could go into  business investments and  increasing  employment. When taxes on corporate income is low, there is an incentive to hoard it instead of spending the money or investing it to start a business.  This has been seen throughout the industry where CEOs and upper management prefer to spend the money on their own salaries rather than expanding their businesses or hiring new employees (Weaver & Fry, 2012).One of the most important ways for people to gain employment in the modern knowledge based economy is through education, however cutting taxes on the wealthy destroys the state’s ability to provide education for its people. Kansas provides an example of what happens when states cut taxes very deeply. The state  cut taxes on the  wealthy and as a result  its  schools are seeing t  significant  decline in  educational  funding compared to pre-recession levels, Cuts  would have been even deeper had the state not  drawn  upon  increased  taxes on the  working  class to  provide  funding for the schools. These cuts ultimately did not increase job production but did cut school funding (Leachman & Mai, 2014).  Therefore cutting taxes for the wealthy in order to produce more jobs is mistake.

Higher taxes for wealthy people:

Wealthy people need to have higher taxes because it leads to more investment in business and improves the health and structure of the economy. Small businesses are the backbone of the economy in both the United States and Canada because of the benefits that they bring in terms of increased employment and innovation. Therefore more small businesses are an important part of the economy. One of the effects of increasing the tax rate is that it increases the percentage of people who are self-employed (Schuetze, 2000). This effect is because the higher tax rate gives people an incentive to invest their money instead of attempting to hoard it. Taxing wealthy people means that the money from taxation can be used to increase the strength of the economy and even possibly prevent it from being weakened by unhealthy activities. By rerouting  money  from the wealthy to social  programs and assisting the poor and the  middle class, they  will not be able to  spend this  money on the  same kind of  financial betting that led to  the financial crash that was  bad for the  entire  economy (Judis, 2012).  By rerouting money from the wealthy into the economy it generates growth and prosperity for the economy as whole. Evidence from the  historical  record  and  from  foreign countries show that  higher  taxes can increase a country’s  growth because it  allows for  the nation to make greater  investments in infrastructure and education which strengthen the middle class (Reich, 2012). This is important because a healthy middle class is the engine of the economy.

In conclusion, the argument that increasing taxes on the rich harms the economy has proven to be largely false.   Historical and statistical evidence shows that when taxes are cut on the wealthy it does not lead to greater employment numbers.  Therefore it is the  obligation of the  wealthy to  give  back to the  economy that  allowed them to become rich in the  first place because  they contribute so  much more than the average  person. Taxing the  wealthy is  associated  with greater  employment  prospects because more  money is diverted to business  growth , expansion, education and  infrastructure and less  money is spent on  financial  speculation and  wealth hoarding

References

Anderson, S., & Cavanagh, J. (2000). The rise of corporate global power. Institute for Policy Studies, 1-17.

Feenberg, D. R., & Poterba, J. M. (1993). Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns. In James Poterba, Tax Policy and the Economy, Volume 7 (pp. 145 – 177)). Massechusettes: MIT Press.

Goolsbee, A. (1997). What Happens When You Tax the Rich? Evidence from Executive Compensation. NBER Working Paper, 1-35.

Hungerford, T. L. (2012). Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945. Congressional Reseach Service, 1-20. Retrieved from http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf

Judis, J. B. (2012, December 12). Rein in the Rich: How Higher Taxes Could Lift the Economy. Retrieved from newrepublic.com: http://www.newrepublic.com/article/111016/rein-rich-how-higher-taxes-could-lift-economy

Leachman, M., & Mai, C. (2014, March 27). Lessons for Other States from Kansas Massive Tax Cuts. Retrieved from Center on Budget and Policy Priorities: http://www.cbpp.org/files/3-27-14sfp.pdf

Niman, M. (2011). Tax the Rich. The Reader, 15-18.

Reich, R. (2012, April 18). Taxing the rich is good for the economy. Retrieved from marketplace.org/: http://www.marketplace.org/topics/economy/commentary/taxing-rich-good-economy

Schuetze, H. J. (2000). Taxes, economic conditions and recent trends in male self-employment: a Canada–US comparison. Labour Economics, 7(5), 507–544.

Weaver, D. C., & Fry, P. (2012). Weber Was Right: Death, Taxes, Working Capital, and the Excessive Propensity for Accumulation. Sociological Forum, 27(3), 780-787.