Being that I hold a degree in economics, I feel that I may be able to help here. (I know this is long, but if you want to read, read. If you don't, dont.)
First, our government taxes high income earners at a greater rate not just because of the assumptions being discussed here. I'm afraid it's a little more cynical than that:).It is also about earning money for our government. If there was a flat tax at, say, 30%, our government would collect less money than one that is tiered, say, where the bottom 20% pay 10% and the top 10% pay 50%. Why? It is really very simple economics.
Let's say we have a grand economy ofthree people. Wow. Three. Anyway, let's say person one earns 100$ a yr, person 2 earns 300$, and person 3 earns 2,000$. If we had a flat tax of 30%, than the government would collect about 750$ for that year. Now let's say that we are using the tier system. Person one gets taxed 10%, 2 gets taxed 25%, and 3 gets taxed 50%. Now we collect 1,085$.
Bottom line, we need to tax the very wealthy at a higher rate if we want our government to collect the same amount of money. I believe that the top .1% (yes- that is .1, with a dot befor the one) of income earners in the U.S. pay about 15% of all government collections, while the ENTIRE BOTTOM HALF PAY LESS THAN 5%. That means that one out of every 1,000 people will contribute THREE TIMES as much money to the government as 500 others. If we changed to a flat tax, our drop in government savings would be FAR greater than the example I used above.
Remember also that if we taxed the middle class higher, than they would have less spending power. Already, they are losing their spending power, and if it drops further (considering they consist of the meat of our economy), it could be disastorous for our entire economy. I won't go into detail- look up Alan Greenspan's concern over this issue if you want more- but it goes something like this:
If a majority of consumers can no longer purchase a healthy amount of goods anymore, than demand will fall. A fall in demand will mean a fall in production to meet the lower demand. With a fall in production there will be even more layoffs and less money earned. It is a vicious cycle that eats itself, and eventually the bottom will drop out.
Oh, and please remember, if the wealthiest 1% in America were taxed 99%, they would still hold morewealth than 90% of all Americans. Also keep in mind that out of ALL THE WORLD POWERS, the U.S. has the highest gap between rich and poor, which is proved by the Gini Coefficient, which I will not discuss but you can research if you wish. And remember, a 50% tax rate is not high at all today considering this gap, as it was once higher than 95% in the 1940s- when the income gap disparity was not nearly as disporportionate as it is today.
You can call people commies if you want, but the only real justification to having a flat tax would be for "fairness" (though this in itself is disputable- again regarding the largest income gap in history).
......Don't know why I wasted so much time posting this, hopefully people will understand it.
The_Baymonster
From another thread.....hope that explains why taxes are the way they are.....
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