Should Rich People Have to Pay More Taxes? Essay Sample
Should Rich People Have to Pay More Taxes? Essay Sample
Today, the rich people are continuing to become richer while the poor people are getting poorer. This difference in the economic status of people has brought a heated topic about increasing the tax rate for people with higher earnings. This paper will shed light on the concept of taxation and explore whether rich people should pay more taxes than lower and middle-class people.
One of the important ways in which the government of a country raises its revenue is the collection tax from its citizens. Tax can be defined as the mandatory financial charge or fee levied by the government on the citizens to gather funds to spend on different public expenditures. Taxation is also a means of measuring the capacity of a state, power relations in the society, and state formation (Amirthalingam). It also serves as a tool for encouraging as well as discouraging certain behaviours, correcting different market imperfections, and modifying the wealth distribution. The tax system of a country plays a vital role in determining the macroeconomic indices such as public debt, economic growth, inflation, and fiscal deficit.
Should Rich People Pay Tax or Not
The view that rich people must pay more taxes brings about a number of thoughts among different people. Some people believe that individuals must pay taxes as per their ability to pay to build the nation (McGee). The believers of this view also believe that the tax fund recipients must avail taxes per their specific needs. The view of other people is that rich people need to pay higher taxes (Aaron). There are yet some other people who believe that high taxes must not be imposed on rich people because, in order to increase their wealth, they have worked very hard and sacrificed a lot. Tax is often considered a tool to reduce inequality. Many people believe that making rich people pay more taxes can help in reducing inequality in the nation.
In a way, it can be considered that it is fair enough that rich people pay more taxes. It is important in order to establish an efficient economy and tax system. As per the cost approach of taxation, the government should impose a tax on the people based on the cost incurred by the use of public goods. Rich people who earn huge revenues are likely to benefit more from the different public goods and services. Therefore, rich people must pay a higher tax rate as they contribute to the maximum public goods cost in the economy. Also, in terms of benefit analysis, people of a nation must pay taxes as per the benefits they avail from the public goods as well as services. In this case, the rich people must also pay higher taxes in comparison to the lower and middle-class people as they are the ones who avail maximum benefits of the public resources. It will not only reduce inequality but also enhance the economic efficiency of the nation. Moreover, as taxation is one of the main sources of public revenue, taxing the rich people who have the potential to pay more can lead to an increase in government revenue.
However, there are a number of loopholes in the approach of making the rich people pay more taxes than the others in the nation. In order to avoid paying high taxes, a number of rich people start engaging in different corrupt activities and tax invasion incidents. It can reduce the tax revenue collected by the government and lead to low efficiency. Moreover, the approach of taxing the rich people in the society more may discourage them from investing more in the expansion of their business. In view of paying high taxes, they may not want to grow their business. They may think that their investments are not productive as a significant portion of their return will go as taxes. However, the chances of rich people refraining from investing in their dream business due to high taxes are quite less. Money is considered to be a great motivator, but it is definitely not the only one. A majority of rich and successful people want to achieve more than just money. Some people want to solve a particular problem while others want to build something valuable and become famous. So, increasing the tax will not reduce the motivation of successful people.
Imposing a higher tax rate on the rich people in the nation can actually help in the faster growth of the economy of the nation. An increase in the taxes on the rich will have little impact on the rich people's spending but will be beneficial for the lower and middle-class people and the nation as a whole (Amirthalingam). A number of rich people themselves have also shown favour to the imposing of the higher tax rate. Billionaires such as Bill Gates and Mark Cuban are willing to pay more taxes in order to contribute significantly towards the growth of the economy and development of the nation. However, instead of taxing the rich people on the basis of their income, the implementation of indirect taxation can be a better solution. It will make the rich people pay higher taxes for the luxurious goods as well as services they avail. Indirect taxes can help the government in collecting higher revenues. It can also serve as a means of moulding the investment as well as production activities in the economy (Amirthalingam).
In the fiscal consolidation era, evidence supports the fact that the rich people need to pay more taxes for the betterment of the nation (Hatgioannides et al.). It can be said that it is the responsibility of the high earners to pay higher tax rates and help the less fortunate people. The government must develop sensible tax policies in order to impose higher tax rates on rich people while ensuring fairness for them.
Aaron, H. "Can Taxing the Rich Reduce Inequality? You Bet it Can." Economic Studies (2015).
Amirthalingam, Kopalapillai. "The Importance of Taxation and the Role of Indirect Taxes in Developing Countries: A Survey of Literature." Sri Lanka Economic Journal 13.1 (2012).
Hatgioannides, John, Marika Karanassou, and Hector Sala. "Should the rich be taxed more? The fiscal inequality coefficient." Journal of Economic Issues 53.3 (2019): 879-887.
McGee, Robert W., Serkan Benk, and Bahadır Yüzbaşı. "Should governments tax the rich and subsidize the poor? A comparative study of Muslim and Christian respondents." Religions 10.2 (2019): 72.