Taking Sides: The Government SHOULD Tax the Rich More
April 29, 2022
Since 1980, income growth has been noticeably higher for the top five percent than for the rest of American families (Pew Research Center). This trend of income inequality has only continued to grow more distinct, and its effects more devastating. Higher levels of poverty, hindered economic growth, increases in crime, limited access to health care and education, and political inequality are just some of the consequences of continuing to allow the rich to get richer at the expense of the vast majority of the American population. As a country, the best methods to combat rising wealth disparities are instituting a wealth tax, as well as drastically increasing various taxes, i.e. income and property, for the ultra-wealthy.
Before increasing taxes for extremely high-income individuals, the various loopholes built into the U.S. tax code need to be addressed and mitigated to end the deterioration of our “progressive” tax system. While originally intended to be progressive, meaning the tax rate increases as one’s taxable income increases, our tax system has become horribly dysfunctional, allowing the extremely wealthy to hire lawyers and accountants who can help them entirely avoid paying much of their taxes. According to the U.S. Department of the Treasury, some of the richest U.S. citizens are able to avoid as much as $163 billion in income taxes each year (CNBC).
Many economic conservatives argue that the wealthy are the best able to stimulate the economy for everyone. However, this is far from the truth—as professors of political science at Yale and UC Berkeley Jacob S. Hacker and Paul Pierson contend, “The benefits of extending the upper-income tax cuts instead will go overwhelmingly to the richest of the rich…while costing roughly $1 trillion over the next decade in lost revenue and increased interest costs on the national debt” (Los Angeles Times). As rich people make an excess of money that they can go on to save and invest, middle and low-income workers have to contribute most of their income to basic survival needs and are often saddled with debt. This creates a vicious cycle of wealth disparity, far from contributing to economic growth. As Howie Hawkins, environmental activist and Green Party nominee for the 2020 presidential election put it, “Rather than failing to build the economy by reducing taxes on the wealthy, we need to actually build the economy by creating a strong foundation of purchasing power in the working class by ending poverty and economic insecurity.”
Finally, a wealth tax targeting overall wealth, including capital gains and dividends, rather than purely income would help to drastically reduce the tax-avoiding advantage held by the extremely wealthy. Right now, the top statutory tax rate on investments is only 23.8 percent, while it is 43.4 percent on earned income. Raising taxes on these investments to match income taxes could help to save $1.3 trillion over 10 years (“Fact Sheet: Taxing Wealthy Americans”).
If we don’t target these problems now, we will quickly find our democracy and political power in the hands of rich elites alone, in a far worse state than we do today.
