Three days late, but I still wrote it.
This blog is partly written in response to Nichole’s post about the current economic situation, particularly as it pertains to taxes. The main things from her post that this is in response to are the concept of raising taxes to help get this country out of debt, the concept that “those who can pay more in taxes should”, and finally the concept that people that don’t want to pay their taxes are being “stingy and selfish”.
The idea of raising taxes in order to get this country out of debt faster would completely back fire. This is due to the fact that if you want to increase tax revenue, you lower taxes, and if you want to decrease tax revenue, you raise them. So, if we want more tax revenue to pay towards getting the country out of debt, we should lower taxes. I know some of you may be thinking that this doesn’t make sense, but if you follow the “rules” of free market economics you will realize that high prices for goods decrease demand for those goods, and low prices increase demand. What do price and demand have to do with taxes? You can look at taxes, especially in a country with a progressive tax, as a “price” for success. Many times in life people find that they get a raise at work, only to be bumped into a higher tax bracket and end up taking home less money. The result is that people have less desire to attain that next income level. If you decrease those punitive taxes, people have a greater desire to achieve.
I touched a little bit on this “people who can pay more in taxes, should” thing in my last post about wealth envy, but I’ll go into it a little bit more here, and explain why they already do, and they still would even if we did not have a progressive tax system. Firstly, if you make $10,000/yr and had to pay 10% of your income in taxes, that would be $1,000/yr. If you make $100,000/yr and pay 10% of your income in taxes, that would be $10,000/yr. Ta da! Those who can pay more would be paying more. The way things are currently structured in this country, if you make $10,000/yr. you pay 15% or $1,500 in taxes, but then you actually qualify as falling below the poverty line, and get everything but Social Security back. If you have a child, and make that amount of money, not only do you get your money back, but you also get extra money, more than what you paid in to start with, back in a “tax credit” which is actually a wealth redistribution program. Whereas the person that makes $100,000 pays 28% (nearly double the percentage) that comes to $28,000. They then do not qualify for any tax credits, and get to leave most of their money in the hands of the government, which the government then gives to the person making $10,000 a year because they didn’t see fit to do something with their life where they could earn $100,000/yr and instead decided to make a career working less than 40 hours a week at minimum wage.
You may be thinking, “Well that person that makes $100,000/yr still has $70,000 left, the other person only has $10,000 to begin with. They should be happy with their $70,000 instead of being so stingy and selfish with that other $28,000.” Which nicely segues to my next point, what’s wrong with wanting to keep what you rightfully earned? To go over this issue, I’m going to give a little bit of background on taxes in this country, and little bit more about this “the rich should pay more” idea…
Tomorrow. And don’t worry, it will be posted tomorrow. I’m going to write it now, but that ^^ is what’s called a teaser.