Should we tax the rich more? (Pros and cons)

Should we tax the rich more? There is an ongoing debate in the USA and across the world about how big the tax contribution of the wealthy should be and whether it should be increased. As economic problems have intensified, so has the debate, with the people on the left of politics generally wanting higher taxes for the wealthy and the people on the right arguing that increasing taxes for higher earners is counterproductive and may indeed worsen many of the problems that it is supposed to solve. Below, I have laid out what I believe to be the main pros and cons of the argument that we should tax the rich more.

When economic times are tough, the government needs to look at ways of bringing in more money. Increasing taxes on the wealthiest people makes sense, as they are the ones who are most able to afford tax increases.

A progressive tax system can prevent wealth discrepancies from getting too big. When the gap between rich and poor gets beyond a certain point, there is an increased risk of social instability and strife, such as crime and political turmoil. Big differences in wealth are also seen by many economists as one of the factors that led to the Wall Street Crash in 1929.

Taxing the rich can also be justified on moral grounds, if it is used as a form of wealth redistribution, with the tax money raised being used to aid the poorest sections of the population.

Countries such as Australia, Sweden and Canada all do relatively well in terms of growth, despite them having high taxes.

Since the 1970s, the income of the wealthiest members of society has increased dramatically, while the income levels for the rest of society have barely moved in real terms, which means that adjustments need to be made.

Money is needed to pay for defense, health, education, social security, etc and it has to come from somewhere.

Governments already waste much of the money that they collect. If taxes are increased, all that will happen is that the government will just have more money to waste and there will be no incentive for them to spend efficiently.

Raising taxes acts as a disincentive for individuals and businesses to make money. Some of the most talented people and businesses will leave the country and find somewhere with lower taxes, if they feel that their efforts are not being rewarded sufficiently.

There is no public appetite for adopting higher taxes and the high taxation rates that were used in the past are now seen as a failure.

Cutting taxes for business has been shown on numerous occasions to actually increase overall revenue. Increasing taxes, on the other hand, just makes businesses alter their investment, spending and tax behaviors in order to find ways of cutting their tax expenditure, which generally leads to an overall decrease in revenue for the government.

Higher taxes inevitably lead to a reduction in investment, as the people most likely to invest have their money supply hit. If there is less investment, then there are less businesses and unemployment increases. With more people out of work, there is less money being spent and the economy goes into a downward spiral.

Increasing taxes for the wealthiest is socially divisive and encourages a class war situation where the poor and middle class begin to resent the rich, and the rich, who find themselves paying an increasing share of the tax bill, resent the poor and the middle class in return.

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