SHOULD WE TAX THE RICH MORE? – I often hear low-income and mid-income families declared that if the ‘rich’ were taxed more they would have to pay less. This would seem like sound judgement accept for the fundamental flaw that higher taxes on the rich only impede economic growth and once you tax them too high they simply leave.
To clarify this point look to the UK in the early 70’s where under a Labour Government the rich experienced an income tax rate of over 70% which led many to flee the United Kingdom to other parts of the world that didn’t penalize them for their wealth.
Fast forward to 2013 and the French Government are thinking about introducing a ‘Socialist Tax’ that would tax the rich to the tune of 75% of their income. The result is almost identical with wealthy individuals closing business and leaving.
So how beneficial is a higher tax rate on the rich? From the information above it is clear to see that this is detrimental to the economy and places a higher burden on the lower income levels as the only way Government can counteract the losses is to increase tax rates on the lower income workers.
Taxing the rich also stifles economic growth. The rich do not become nor stay rich by sitting on their money. These people actively invest in new ventures with promotes economic grow and employs other that pay tax.
A classic example of lower taxation for the rich that benefits the economy and those in lower income brackets came about in the 1980’s when Ronald Regan, President of the United States, over a three year period slashed taxation on the rich from 70% to just 28%. Was this detrimental to the raising of finance for the U.S Government? No, in fact in it double government income from a little over $500 billion in 1981 to over $1 trillion in 1990 putting to rest fears that reducing taxation for the rich is a bad idea.
It is simply an economic fact the rich will invest if they are not penalized for doing so and that their on-going investments create jobs and wealth.
The idea of ‘welfare’ was to tax people who could afford it in order to give money to the poorer classes and yet the welfare system, regardless to which country you reside in, is collapsing under its own weight of bureaucracy simply because governments are not business people and they fail to comprehend how to manage money.
Nobody likes to pay taxes and yet we know that it is an essential part of our social structure and allows our governments to provide essential public services.
One of the biggest gripes we have is paying taxes to feed those who are simply too lazy to work, but the welfare system has promoted this so successfully that many people find that they are better off on welfare rather than working for their money.
Why? Again this comes down to taxation. If the population is so heavily taxed, rich and poor alike, then there is little incentive to work. With a growing population on welfare requires the government to increase taxes which in turn exasperates the situation. It is quite literally an upward spiraling evil.
In the UK’s last Budget announcement in March 2013 it set out a number of measure to reduce taxation, and not just for the lower income bracket. It is hoped that this will spur more free enterprise and investment and in turn create more jobs which will then mean more people putting into the pot rather than taking it out.
It has been proposed and ignored for many years that ‘welfare’ should be highly restrictive so that it becomes a life-line and not a way-of-life.
The proposals have often been to start by reducing taxation on all levels of income in order to promote economic growth. Stage two then comes in to reduce welfare dependency and get people back to work become productive members of society and taxpayers.
Regarding the rich and businesses one alternative is to make it easier for them to make money, which in turn can be reinvested to create jobs, getting more people off welfare and paying taxes, and finally adding to sustainable economic growth.
The question is should the U.S and UK adopt a system of tax penalties just because of a person’s wealth; as they intend in France? The answer is a resounding ‘No’ because we are already seeing the consequences of this folly as the rich make an exodus to other countries.
There is little doubt in our minds that change needs to be made but this change can only be made once we take on-board the fact that taxing the rich to simply feed the welfare system is an economical disaster.
From most of the ‘Tax the Rich’ arguments I have heard most of those advocating higher taxes for the rich simply view the rich as having so much. Ask yourself this… If you toiled and worked hard and finally became a high net worth individual, how would you feel if a completely incompetent system (that’s Government) took a large percentage of what you had worked for just to waste it?
All people, especially those in a lower income bracket, moan about how much they have to pay in tax which leaves them with less disposable income to spend, which in turn boosts the economy. Now turn this around and think not about spending power but more importantly ‘investing power’ that is investing in new ventures which creates employment which in turn generates more tax revenue.
Do you still really believe that choking the rich to death through high tax levels is really going to turn the economy around and help the poor?