Taxes: Distributional Effects Essay

1663 words - 7 pages

During this time of economic crisis the top priority is to see revenue growth. It is important there is a fiscal solution to create a sustainable budget agreement providing fairness and a logical taxation process for both higher income and lower income people. Throughout this span of time, trying to figure out a budget deal, we see trends of tax cuts, raising of taxes and spending and investing. All of these trends aim at the same mission to raise revenue and create a stable fiscal environment for the future long term issues not just short-term issues. The trends must keep a few things at the forefront of the budget decision, Medicare, Medicaid and Social Security. These are all things that are continuously growing and receiving more members each year. It is important that the political figures find a way to create a sustainable budget plan that will support these programs and not spiral the nation into a financial crisis, revenue must the increased.
When trying to raise revenue the first options that come to mind are making cuts to programs. Our major programs are the Medicaid and Social Security programs. By making cut to the programs it can cause a imbalance of fairness. The people who need the government support are having it taken away when the high income class is still remaining the same with low taxation. It is only fair and logical to share the burden and make both cuts and raise taxation. “Interestingly, raising taxes to pay for current spending has proved more effective at restraining spending than allowing the government to finance its outlays with deficits”(Gale 2). We see proof of this during President Clintons term where taxes were raised and spending fell. By just making tax cuts for society will not decrease spending. There has got to be a balance between spending cuts and a rise in taxation. Raising taxes will not put society in the hole regardless of beliefs. “In 1993, top income tax rates rose to 39.6 percent, and the economy flourished for the rest of the decade” (Gale 2). I think the obviously solution is that income taxes are a big part of how the government get funds so even though it would make the public unhappy to get more income taxes taken out it is the right thing to do in order to see a change more quickly.
Progressive taxation is what needs to commence in the the high income class. The tax burden should be laid upon those who can afford it not those who are already struggling too. This group is the high income portion of society. As said in, “A Perspective on the Budget Deficit and Revenues,” brings up two issues, it will hurt small businesses and increase a class warfare. Small businesses would not be affected by this due to the fact they can deduct new investments, wage payments and debt used to invest. As for the class warfare issue which is a struggle between classes this argument is invalid because the high income class would not be effected tremendously by this tax raise but it would surely help to...

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