Taxation of Wealthy People - Essay Example

Governments have several ways to earn money, so they should not rely on taxation in excess. Government funds are often misallocated; otherwise, people could have been given better health care, social security, higher education, etc. The present tax system in the USA is steeply graduated. Therefore, a proportional system of taxation should be implemented because that is the American ideal of the concept of equal justice under the law. In this context, Chris Edwards notes that the top quintile of taxpayers is already paying at a rate five times higher than the rate at the bottom (published on the website of The Economist in 2007).

In the case there are disproportionately huge tax deductions toward the rich people, larger amounts of asset accumulation by the wealthy people should be manifested by the means of financial disparity. However, this is not the actual case. The rich people are already being taxed at higher rates, yet the gulf between the rich and the poor is widening. Moreover, there is less evidence supporting the allegation that wealthy people are accumulating assets since the recent economic slowdown in 2008 has shown us that many affluent organizations and individuals have gone bankrupt under surmounting financial pressure caused by unpredictable effects of the market volatilities on the investments.

According to Chris Edwards, efforts to increase tax rates for rich people can prove to be dangerous. He points out that in the USA, President Obama wants to raise the top two income tax rates which would likely reduce production and cause more avoidance by highly skilled people. Further, as published on the website of the Economist, Edwards writes, “43% of American households do not pay any federal income tax”.

The governments, particularly in Western Europe and America, appear to be trying to buy social peace by imposing higher rates of tax on wealthy people. In this context, David Brunori writes, “Generally, local income taxes (specifically, piggyback taxes) can increase the progressivity of the tax system. A piggyback local-option income tax system would impose greater burdens on higher-income taxpayers than on lower-income taxpayers. Essentially, the tax would have the same degree of progressivity as the state income tax” (87). However, fair distribution of wealth by adopting such sort of taxation policies is not plausible at all.

Hence, according to Niels Veldhuis and his associates, “taxing the rich is not the source of wealth” (60). A fair and straightforward stand in this regard is important since it is practically impossible that the government collects money from the rich and then fairly redistribute it to the poor. The American concept of equal rights for all is severely contradicted by a steeply graduated system of taxation. Finally, Niels Veldhuis and his associates remark that a country needs “more rich people; imposing more taxes is not the way to increase anyone’s wealth” (60). So, the government must restore the equilibrium by avoiding the practice of higher taxes for higher-income groups.

By increasing tax rates for rich people, the government is impairing socioeconomic equality in society. The concept of socio-economic equality cannot involve random redistribution of wealth in the name of controlling poverty. A person who works hard to earn more must not be treated as an alien by subjecting him or her to different legal and economic norms and practices. Hence, it is unfair to tax the wealthy more that the rest of the tax base.