To say that the poor and the rich should not be similarly burdened by taxes seems almost too much of a redundancy to even mention. The equation seems pretty simple. We need taxes to pave roads, build skills, mitigate the needs of the most vulnerable members of the population, and even maintain the strength of our national defense. This money comes primarily through income and corporate taxes, and while the burden is, to some capacity that of every American citizen, it seems quite logical that those with the very most should bear more of it.Indeed, from a very literal perspective, they do. The family that makes $1,000,000 a year pays more in taxes than the family making $30,000. However, there is a large contingency of people that aim to reduce the tax rate for the wealthy, and trust that doing so will in the long term provide more wealth for everyone.
Unfortunately, it just doesn’t work that way, and today we will be taking a look at why that is. Regressive Vs. Progressive Tax:In order to understand the issue of taxation in regards to the wealthy and the poor, one must first acquaint themselves with two terms: “regressive,” and “progressive” taxes.
A progressive tax quite simply is applied at a higher and higher rate as an individual’s income increases. In other words, it affects the wealthy more than it does the poor. The income tax is ideally supposed to be a progressive tax but the extent to which this is true tends to diminish when the nation begins to adhere to a “trickle down” taxation platform.
Conversely, the regressive tax is either applied the same way to rich people as it is to poor people or worse yet, it is applied to a greater extent to those with lower incomes than it is to those who are more affluent. The classic example of a regressive tax are the “sin taxes”—a transactional tax levied against goods and services that are deemed unhealthy or otherwise bad for you. The “sin tax,” is applied to things like alcohol, tobacco, fast food, etc.It is regressive not only for the fact that it poses a greater burden (proportionately) to the lower classes than it does the upper, but also because it is being applied to goods and services that are more often utilized by people with lower incomes.
In a broader sense, all transactional taxes are somewhat regressive insofar as the fact that they also present a more substantial burden to people with lower incomes than they do for people with higher incomes. This is mitigated somewhat by luxury taxes (taxes applied to goods or services that are deemed unnecessary or otherwise luxurious) but it is nevertheless a problem that could use revising. Trickle Down Economics:Trickle-down economics is a tax theory that essentially mandates the implementation of regressive taxes. The trickle-down theory has been a staple of the conservative platform for decades but reached its peak during the Reagan era (earning it the nickname “Reaganomics”).The idea behind trickle down economics is that if the wealthy, entrepreneurial class has more money, they will use it to re-inevest their money in a way that leads to things such as job growth and wage increase.
Right away the concept sounds a little bit fishy, and indeed application has proven this to be the case. It would be a lie to say that the economy hasn’t seen spikes under trickle down theory. Indeed, it has, but to attribute these spikes solely to the regressive tax structure of trickle down economics is misleading. The economy can be affected by any number of factors, and indeed equal if not superior growth has been demonstrated when tax rates on the top member of the 1% climbed to 91%. However, sporadic growth or not, a more comprehensive look at the data on regressive tax structures indicate that there just isn’t any actual evidence that cutting taxes on the wealthy leads to growth in jobs or opportunity. Certainly, it does not result in wage increase. Tax rates have risen or fell in a significant capacity six times in recent American history, and each time the results have been different. What does this tell us? While this is a point of contention that few people can agree upon, it seems to mean that the tax rate on the 1% has little to do either way with job growth.
To suggest that raising or lowering taxes on the wealthy will spark growth in the economy seems to be disingenuous. However, while it might not be fair to say that any specific taxation plan alone will create new jobs, it is very fair to say that lowering taxes on the wealthy places a difficult and unfair tax burden on the poor. So, What Can Be Done About it?The good news is that we live in a democracy. The answer to dealing with almost any problem in a democracy is always relatively simple, even though executing that answer often isn’t. In order to ensure that our country implements a progressive tax rate you need to communicate, not just with your senators, governors, and congressional representatives, but also with your friends and family members. Tell anyone who will listen how you feel, and why you feel that way.
If at the end of your conversation they agree with you, encourage them to contact their representatives as well. In a democracy, everyone has a voice. Your responsibility is to use it. Conclusion:Tax reform is no simple matter, especially when you are simply a private citizen.
You might find things particularly disheartening in light of the GOP’s recent tax bill that seems very nostalgic of Reaganomics. Just remember that with your voice, and with your vote you are more powerful than you think. Change may not happen quickly, but it does happen. In order to provide public institutions like schools and other social programs the robust support they need, we know what we need to do: embrace a tax plan that is willing to take a small step towards fighting the wealth gap in the United States.