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The United States currently has the third-highest tax burden of any developed nation. Americans pay more taxes than their counterparts in almost every other developed country. High taxes, combined with widespread wealth inequality, have left many people feeling like the system is rigged against them. Wealthy individuals, corporations, and trusts are helping to drive that inequality by using loopholes and other special breaks to reduce their tax burdens significantly below the standard rate. These taxpayers often have accountants and advisors dedicated solely to finding ways to lower their tax bills. In contrast, the average American faces a much higher tax bill every year as a result of these same tricks utilized by the wealthy. It’s time we evened the playing field and started taxing the rich at a higher rate. Here are 10 reasons why:
Taxing the Rich Would Help Reduce the Federal Deficit
The federal government faces a massive deficit each year. Depending on which projections are correct, that number could be as high as $1 trillion. The federal government must borrow money to cover that deficit, leading to an enormous debt that currently stands at $20.5 trillion. Every dollar the government borrows must be paid back with interest. Interest payments on the federal debt currently account for more than $300 billion per year. Higher income taxes on the wealthy could help reduce the federal deficit. Taxing the rich at a higher rate would generate additional tax revenue for the government. This additional revenue could be used to pay down the federal debt (or used to fund worthwhile programs).
Everyone pays when there’s no tax on the wealthy.
The wealthiest taxpayers currently pay an incredibly low rate in taxes. This has created a situation where many Americans are paying a higher tax rate than their millionaire neighbors. For example, there are many low-income Americans paying a higher rate than the billionaires living across town. That’s because almost everyone is taxed at the same rate. In contrast, many wealthy taxpayers have found ways to pay a drastically lower rate. This means that someone earning an average income will pay a higher percentage in taxes than many millionaires and billionaires.
More tax dollars could go to helping low-income Americans.
Higher taxes on the rich could mean more federal funding for programs that help low-income families. The government currently provides a number of social services that are important to low-income Americans. Contributions to programs like Medicare, Medicaid, and Social Security are funded by taxes collected from workers and employers. As the federal deficit has grown, funding for some of these programs has been reduced. Additional taxes on wealthy taxpayers could help fund these important programs to help low-income people.
Taxing the wealthy would create jobs.
Taxing the wealthy would increase federal revenue and reduce the federal deficit, but what good is that if it doesn’t do anything for the American economy? The economy is driven by consumer spending. People need to have money in their pockets to buy things and stimulate the economy. When there’s excessive taxation, however, people have less money and are less able to participate in the economy. The government currently takes a significant chunk of the money earned by wealthy taxpayers. Higher taxes on the wealthy would increase the amount of money they have available to spend. This would create jobs and help the economy recover from the Great Recession and the Great Depression.
Taxing the rich is just a start – not the endgame.
Taxing the wealthy is an important first step to addressing the wealth inequality in this country. It creates more revenue for the government that can be used to fund programs that help all Americans. Taxing the rich at a higher rate is only the first step toward addressing wealth inequality. It’s important that the government look at other ways to help low-income taxpayers. The government can offer tax credits, deductions, and other breaks that make high taxes more manageable for many families.
A wealth tax would be an effective way to combat inequality.
Most discussions about inequality begin with the idea that people in the upper class have far more money than those in the lower classes. Wealthy Americans have, on average, 10 times more money than low-income Americans. The American system has provisions for taxing that wealth. The trouble is that people can find ways to reduce the amount of wealth taxes they pay. A wealth tax would be a better measure of how much wealth an individual has. A wealth tax would amount to an annual review of each taxpayer’s assets. The government would look at what taxpayers own (in addition to what they earn and what they owe). A wealth tax would be a more effective way of determining what each taxpayer owes the government.
The rich will always find ways to game the system, so why not help?
As long as the wealthy find ways to significantly lower their taxes, they will be contributing less to the federal government. This means that everyone else must pay higher taxes to make up the difference. Wealthy taxpayers have many ways to lower their taxes and reduce their contributions to the government. This is especially true in the era of digital information, when it’s easier than ever for people to find ways to hide money and reduce their tax burdens. By investing in ways to close these loopholes, the government could generate more tax revenue from the rich. More tax revenue could go to programs that help low-income people and reduce the federal deficit.
There are many reasons to tax the rich at a higher rate. Doing so would help reduce the federal deficit, help fund important social services for low-income people, and create jobs in the economy. It’s important to note that this is just a first step. It’s important that the government also look at ways to help low-income taxpayers by providing credits and deductions that reduce their tax bills.