Should The Rich Pay More Tax? by Jamie McIntyre
The argument is: everyone should pay their fair amount.
On the surface it sounds reasonable… despite being deeply flawed.
And I’m sure there are many millionaires who don’t care if they pay more tax; billionaires even, like Warren Buffet.
And good on them.
However if they think raising taxes on the rich will solve the country’s economic problems, they are sadly mistaken.
Obama hopes this class war policy will help him win the election, because his opponent, Mitt Romney, is wealthy, and sensitive on the issue.
But is it good policy?
And is it fair to say the rich don’t pay their fair share of taxes in America?
Let’s take a look at the facts…
If the rich in America are taxed at 30% (increased from the current average of 17%) it will only raise $5 billion in extra taxes, which is irrelevant when facing a trillion dollar deficit.
Sure, it sounds like a lot, but it’s a drop in the ocean, which will make no difference. Actually it would most likely decrease productivity.
It won’t help the deficit.
So it may be good politics, but certainly not good policy.
Also the top 1% of Americans (in terms of income) already pay 40% of the US tax bill.
The top 5% pay 60%.
The bottom 50% only pays 3%.
So to suggest the rich don’t pay their fair share of taxes is simply not true. And taxing the rich could in fact reduce productivity and incentives.
If Obama really means it when he says, “everyone should pay their fair share”… really he should be saying the bottom 50% of US taxpayers need to be slugged with much higher taxes.
In fact it’s the wealthy and middle class in western society that are largely footing the bill for hospitals, roads, education, etc. Yet this is rarely acknowledged.
The top 5% could come out and say:
“It isn’t fair!”
“We’re paying the majority of the cost of schools, hospitals, roads, etc. But we don’t even use public hospitals and public schools. So how is it fair we pay 60% of the costs?”
There’s a failure to recognise the contribution of those that outperform financially and to see they largely represent the solution, not the problem.
They have achieved success against all odds and created jobs and wealth for society, which has boosted the overall wealth for everyone as a result.
That’s a good thing.
Increasing taxes to take from them and give welfare to those who are less productive is an act of wealth destruction and a form of institutionalisation that crushes the human spirit.
It’s like saying; “You aren’t good enough or can’t make it so here’s a hand out.”
Now as a compassionate capitalist, I’m all for being generous and helping those who unfortunately can’t help themselves.
However this requires a small fraction of taxes.
The higher living costs in western societies can largely be blamed on wastage by governments, and poor economic management destroying wealth.
Wall Street would be the only exception. It’s seen large increases in wealth for a select few through “Weapons of Mass Destruction”, as Warren Buffet would term them, that haven’t added wealth to society.
This needs to change.
What about Australia?
Well Australians pay a lot more in tax.
We’re a highly taxed nation.
30% is the company tax rate, which simply isn’t competitive.
Plus the myriad of other taxes such as: payroll tax, GST, stamp duty, and so on, makes it an expensive place to do business.
Good economic management is what you need to cut wastage and expenses. But you also need investments to stimulate jobs and grow the economy at the same time.
Something that will lead to the European downfall if Spain, Italy, and Greece don’t do it.
The top 1% of Australians paid around 22% of the tax in 2011.
Bottom 20% pay 2.1% of total taxes.
Simple Ways To Stimulate The Economy Are To:
Only borrow (go into debt) to invest into the country’s future.
So borrowing to invest into infrastructure and so on, which will lead to higher GDP in future years, is smart.
Borrowing to pay voters cash bonus for political bribery is not; or for pink batts or a $16 billion BER school program is not.
Selling assets to simply retire the debt generally created by poor government spending (as seen in Qld) is not.
Selling assets at the peak and remaining in control of assets whilst using the money to invest in other, more productive areas is smart.
Governments can do well from selling some assets at certain times.
Foreign investment is good.
Foreign control isn’t.
Taking from the rich to give welfare that makes others lazy and/or dependent is plain stupid.
Inspiring, encouraging, educating, and empowering those earning less to strive to do better financially grows the economy.
Starting class warfare and resenting the wealthy is like cancer in a society and a clear reflection of societies that are losing their way.
Ideas To Stimulate Higher Incomes For Everyone And Increased Wealth For An Entire Economy:
Increase the tax-free threshold for lowest income earners to incentivise working, ahead of welfare.
This is actually going to happen now, with an increase from earnings of $6,000 to $18,000 before you have to pay tax.
It also cuts the need for millions to have to file tax returns.
A smart move.
However if we used the argument, “the rich should pay a fair amount of tax”, then that would apply to everyone.
And that would mean the tax rate on the lowest income earners would jump up to the 30% companies pay in Australia.
This highlights the argument is flawed and of course shouldn’t occur.
Lower taxes across the board to stimulate growth.
Reduce the company tax rate for all companies.
However incentives such as only a 15% or 20% tax rate for companies earning less than $1 million a year would massively stimulate the growth of small companies at a time when companies can at least afford to pay higher rates of tax.
Elimination of payroll taxes, or at least in the short term raising the threshold to companies with less than 100 staff being payroll tax-free.
And other stimulating tax incentives could be used to boost productivity and the overall economy.
Many people don’t understand you can, in fact, lower taxes and increase total tax revenue.
And it’s this failure to understand basic mathematics that enables governments with socialist views to bribe electorates through self-interest…
…and for people to accept higher taxes thinking it’s just the way it needs to be when it simply isn’t the case!
Let me show you what I mean:
Say an economy turned over $1 trillion at a tax rate of 30% generating $300 billion in taxes.
Similar to the tax take of Australia, at approximately $350 billion p.a.
If lowering tax rates to an average of 25% down from say 30% stimulated the economy to $1.5 trillion…
Then 25% of $1.5 trillion is $375 billion, up from the reduced $1 trillion economy at 30% being only $300 billion.
A higher tax rate to run a country is a reflection of a poorly managed, inefficient economy.
Just as high costs of living is also.
The philosophy of, “Let’s use class warfare to attack the rich and increase taxes to then give to those earning less”, in an election campaign is dangerous and needs to be challenged.
And it seems to have a large following, even in rich countries where examples of wealth and success for anybody abound.
This mindset causes more destruction to wealth for everyone than anything else.
Whenever people start thinking, “It’s the rich. That’s why I’m poor.” Then now they really are poor and screwed.
Poor in mindset, poor in intelligence and common sense.
And poor in personal power.
When in fact, generally speaking, it’s the wealthy that have increased the wealth of society by taking calculated risks and growing companies that employ others and boost the economy.
And it’s the desire to strive to have more that grows an economy and helps increase everyone’s wealth.
Of course this doesn’t mean people need to be materialistic or unbalanced…
But achieving a fraction of one’s financial potential, who does it help?
- The tax department
- Your children
- Your employer
- Your country
Being poor and a burden on your family and on society helps no one.
May sound harsh but it’s true.
Striving to do better is a contribution to society.
A willingness to give your effort, intellect, and sweat to make society and the world a better place in a small or big way.
Of course there are exceptions to the rule however the key distinction is:
Wealth is created by taking responsibilities for your actions.
Accepting your life is largely the result of your own thoughts and actions and then taking calculated risks when there is no certainty of success to increase your chance of success.
Whether that risk is to start a business, or to invest, or to change careers, or to invest in your education.
All for the chance to succeed.
Without this desire or opportunity we would all be poorer.
Let’s encourage people to strive to be better, to be wealthier, to add more value and to give more.
Society as a whole will be better off.