http://www.economist.com/node/21543165
This article surrounds the topic of America complex tax system. Barrack Obama has made a call to Americas millionaires and billionaires to pay their far share. To do this he proposed to introduce a minimum tax rate on millionaires and return the top income-tax rate to 39.6% from 35%, and the other 98% of Americans would not have to pay more, he claims. However, as the article states history shows that deficit reduction works best when most of the burden falls on spending cuts. This means that the middle class entitlements would be reduced. The idea of spending cuts just after the US has adopted a kind of universal health care program, education in the US is not even near quality of other developed nations and the continuous deterioration of infrastructure makes the idea of spending cuts scary. How else do you see the US tax system changing in the future? What advantages and disadvantages will come from Obama's proposed plan to raise taxes on the rich?
7 comments:
Honestly, I see the tax system changing very slowly, and without any additional clarity. The tax code is burdened by a similar act to 'pork barreling', in which representatives fight for specific cuts and exemptions that benefit their constituents. Legislators are also impacted by influential lobbyists, who fight for obscure cuts.
As to Obama's tax cuts, I feel as though these will have a minimal effect in terms of increased government revenue. The wealthy spend a significant amount of effort attempting to reduce their tax burden, and when one rate soars, or one loophole is closed, they will find a way, be it foreign investment or specific tax credits, that will allow them to reduce their burden to a similar amount.
I also agree with Emma. The rich specifically dedicate their resources to eliminating their tax burden, so I do not believe that Obama's plan to raise taxes will have as much of an effect as many think it will have.I believe as long as the tax rates continue to go up, people will do whatever it takes to avoid paying it. I think many times the government just sees raising taxes as an "easy" solution to get more revenue.
As comments made above, governments should probably figure out an incentive to make the rich pay the tax. Possible incentive could be a tax credits/coupons that the rich could accumulate for future use (years that after solving the impending debt problem). Or, the government might obtain the financial support from the rich by incenting them to buy the treasury bonds providing them with other benefits (not limited as coupon rates which should not be set at a high level at this time.) The benefits could be derived from other business sectors also.
Whether the rich try avoiding the tax raises or not, they need to pay more, or something has to be done to change the level of inequality we have. Instead of spending money supporting plans/policies/politicians to help them pay less tax, how about spending that money on the betterment of the nation as a whole?
I agree with the author in that the most efficient way to see tax revenues increased is not to raise taxes, but instead to close up some of the convoluted tax loops that exist. Tax code simplification would clear up a lot of them confusion surrounding these arguments, and would make broader discussion more viable.
The current 35% for the top income-tax for the rich is really not large enough compared to other developed nations around the world. Simply by cutting spending won't fill the budget hole. Even if it does, the gap between the rich and poor is still too large which contributes to great social instability, as saw recently on the Occupy Wall Street movement. By increasing the top income-tax, the gap between the richest and the poor can be filled by a certain degree.
I agree with Obama's proposal that the rich should pay more in taxes. They currently pay less than some middle class, which is definitely not the way it should be. While the article points out that the middle class may also see some pay raises, it also says that the rich would shoulder more of it. This I definitely agree with.
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