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Author Name Assignment Subject Taxation of the Wealthy People Introduction Today, we live in the age of globalization. The concept of freedom is critical to the materialization of a global society. No freedom is viable without economic freedom…
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Assignment Taxation of the Wealthy People Introduction Today, we live in the age of globalization. The concept of freedom is critical to the materialization of a global society. No freedom is viable without economic freedom. The world has witnessed the failure of the planned economy with the fall of the former USSR. However, certain features of planned economy are still visible in the form of socio-political interventions that take place in the mixed economy capitalism. From the perspective of the American capitalist democracy, such policy interventions by the government are dangerous. Imposing more tax on the people with more income and assets is a similar policy intervention on the part of the government, which can hardly be justified. Research Question: Discuss in detail why it is unfair to tax the wealthy more than the rest of the tax base. Discussion Governments have a number of ways to earn money, so they should not rely on taxation in excess. The government funds are often misallocated; otherwise people could have been given better health care, social security, higher education, etc. The present tax system in USA is steeply graduated. Therefore, a proportional system of taxation should be implemented because that is in accordance with the American ideal of the concept of equal justice under the law. In this context, Chris Edwards notes that the top quintile of the taxpayers is already paying at a rate five times higher than the rate at the bottom (published in 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 the wealthy people are accumulating assets, since the recent economic slowdown in the year 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 the rich people can prove to be dangerous. He points out that in USA, President Obama wants to raise the top two income tax rates that would likely reduce production and cause more avoidance by the highly skilled people. Further, as published in the website of the Economist, Edwards writes, “43% of American households do not pay any federal income tax.” Actually, the governments, particularly in Western Europe and America, appear to be trying to buy social peace by imposing higher rates of tax on the 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 grater 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 straight forward 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 tax for higher income groups. Conclusion By increasing tax rates for the rich people, the government is impairing the socio-economic equality in the 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 definitely unfair to tax the wealthy more that the rest of the tax base. Works Cited Brunori, David. Local Tax Policy: A Federalist Perspective. Washington DC: The Urban Institute, 2007. Print. Edwards, Chris. “Economist Debates: Resenting the rich: Statements.” The Economist – World News, Politics, Economics, Business & Finance. The Economist. 2009. Web. 25 May 2011. Veldhuis, Niels, Michael Walker, and The Fraser Institute. Tax Facts 14. Vancouver: The Fraser Institute, 2006. Print. Read More
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