Government Taxation

This post is in response to the post about the Bush Tax Cuts and the one about "Robbing from the rich and giving to the poor." Certainly this is a sensitive issue for many people and I will do my best not to let any preconceived bias that I may have about the topic affect my post. This whole idea of how and who the government taxes though reminds me of principles that I have learned in my economics class.

Just a couple of weeks ago we had a discussion on taxes that we then had to take a test on just recently. One of the specific things we talked about was Progressive and Regressive Taxes. Progressive taxes are taxes in which the rich pay more, in terms of a percent (%) of their income than the poor do because of the amount of their income. In other words, the more money you make, the higher percent of taxes you pay to the government from that money, one example being that of the aforementioned income tax. Regressive taxes on the other hand are taxes that decrease percentage (%) wise at one's income increases. Some examples of this tax are taxes such as sales and property tax.

Now, it's no doubt that the government needs money to pay for funding, public services, projects, and other things. It also comes to no surprise that taxing those who have a larger income may be an attractive idea because of how much money that have, especially with all of the payments that the government needs to make, or at least say they need to make.

From this though, results the argument of whether or not taxing the rich substantially more than the poor is a good idea. In my economics class, it was recently discussed that the tax ceiling, or maximum percentage of one's income that can be taxed is currently around 36%. Certainly this is a very high number in some peoples opinion, and a low number in others opinion's. A point that was raised in class however got me really thinking about the tax situation going forward, and whether or not i would be better off making more money or less money. The point that was made was that if the tax ceiling were to raise above 36% and reach 50% and then 60% and so on until we reached the 70's or 80's percentile, is what would the motivation then be to do well financially and work hard to make a lot of money if more than half of it would then go to the government? Would small businesses and entrepreneurs begin to thin out? How would this affect the economy? Would those making more money settle for being lazy if they figure they can get the same amount of take-home pay as a poor person who doesn't work as hard as they do does?

The final point from my economics class that sticks out in my mind is that the government makes 80-90% of their taxes off of the very rich and wealthy people in the country, such as the multimillionaires or even billionaires in some cases. I have no comment one way or the other on how things should be done, but I suppose I would just invite people to raise and think about questions on how things are done in this country. Is it right for those who have worked hard for their success to pay substantially more than lower-middle class do? Certainly they have more money available, and will naturally be taxed more than some people just because of the large amount of their income, but should they be taxed as much as they are? Should the government really tax people near 40% of their income? Should the government raise the percentage that rich people are taxed or lower it? Will it really help resolve the problem of the national debt? How long will the rich put up with being taxed so much before they just say forget it and no longer have the motivation to earn as much? These questions as well as the ones raised previously are all things that I think we should consider, as we will soon be, if we are not already part of the vast working class of America who are paying taxes to the government.