Why Increase the Tax on the Rich?

For the last year or so there has been a lot of debate regarding raising the taxes on the rich. This debate has intensified at the end of 2010 due to the near expiration of the Bush tax cuts. Every person leaning to the left thought that President Obama would not extend the Bush Tax cuts for the rich. However, after some fighting which did not go on for a long time, or so it seemed, President Obama relinquished to the Republicans and extended them to the great dismay of the people who care about the economic stability of this country.

I believe this is the worst thing the President has done but I can understand why he did it. I can understand that the Republicans left him little but no choice but to extend the cuts or they would have basically shut down the government. However, I would have wanted the President to fight for the Middle class more and to show to the people how the Republicans are trying their hardest to ruin this country.

But since all of this is behind us now and since we can only look forward, I decided to write this article to show why we should raise the taxes on the rich. This has nothing to do with being a Democrat or a Republican but being an American. I also want to explain that these reasons are based on facts and not just an opinion.

We should raise the taxes because, to put it simply, we used to do it. In the 1950s and 60s all the way to the 70s we were taxing the rich over 90% for every dollar they make over a hundred thousand dollar. So, we took 90 cents out of every dollar they made over a hundred. Once we started lowering the taxes in the 70s, we droppe dit to 70% which is double what we are doing today. In 1955 the GNP was growing at a rate of 7.6 % and we had a 4.1 million surplus in the budget by 1956. In the 1960s the United States experienced an amazing economic expansion and inflation was stable and corporate profits were at record high to the contrast of what Republicans claim. When we have high taxes, the economy grows and the country flourishes.

Taxes must be raised because the government relies heavily on taxation. Taxes are the income of the government and if we keep lowering it, then of course there will be a deficit and of course the government will not be able to support itself. This is just common sense. In any household, if the income decreases drastically, the members of that household try to increase that income in any way possible, which is usually by getting another job and lowering their expenses. Thus, America must increase its income by raising the taxes. That is the only plausible way to increase that income.

Over the years, the burden of the income tax has shifted from the corporations to the individuals. Not only that but it shifted to those individuals who are not making enough money to carry that heavy burden. For instance, the gigantic General Electric made $10.3 billion dollars in 2010 but did not pay any tax for it. In fact, GE received a tax benefit of $1.1 billion. So, a company like GE, who is making money the average Middle Class worker won't see in a hundred lifetimes, is not paying any taxes at all. In fact, they are getting tax benefits. Worse yet some people argue that we should be in favor of them getting lower taxes! The Tax Foundation stated "the average Joe should be in favor of lower corporate taxes because ultimately they are paying the corporate income tax. Either as workers, getting lower wages and fewer jobs, or as consumers, paying higher prices, or as retirees, getting lower dividends and earnings on their investments." This is a very interesting statement for three reasons. One, it acknowledge the fact that we, the individuals, are actually paying the corporate tax while they are not. Two, it fails to notice that this is the case currently with low or no taxes. We are already getting low wages, fewer jobs, and paying higher prices. And three, the statement is intended to incite fear into anyone from workers to consumers to retirees. The fact remains that it is a grossly incorrect statement. Republicans argue that taxes must be low to create jobs. Well, let's take a company like GE who, according to the New York Times, has laid off one-fifth of their American workers since 2002. Thus, with low to non-existent taxes they are not creating any jobs but destroying them. The tax burden should go back to the corporations because it is the right, the fair and the fiscally responsible thing to do.

Republicans argue that we should lower the tax and not raise it. In fact, the Wisconsin congressman Paul Ryan listed in his plan that he would like to cut the taxes on the rich to 25% and lowering the corporate income tax to half of the rest of the industrialized world. Tim Pawlenty, who is running for the 2012 presidential election would like to give more than a million dollar in Tax Breaks for the very richest. Michelle Bachmann (R-MN) who is also running for the 2012 presidential election echoed Pawlenty but wanted to lower the corporate income tax to a whopping 9%. Not only that but she wants to raise the taxes on the working class! The argument is that lowering the taxes would strengthen the US corporations and companies. But, if we take a look at the top biggest companies in the world, we will see that the United States have 5 of these and the top one is indeed American and the UK comes in distant second with only 2 companies. Furthermore, the US corporate taxes are not really that high, as Republicans would like to portray it. On paper the corporate tax in the US is 35% but clearly that is not the case with GE. In fact, the corporate tax starts at a mere 15% and with some companies with exemptions like GE; it is reduced to 0%. Therefore, we are not a country that has the highest corporate tax; we are actually among the lowest. We are not a small country like Bulgaria or Montenegro who should lower its taxes to attract companies. We have the biggest market in the world and we should act like it. Companies should want to come here and not run away like the Republicans say.

One of the most important reasons as to why we should raise the taxes on the rich is that the deficit would sharply decrease. How would that happen you may ask? Let's go back to 2001. It was Bill Clinton last year in office and he had the fourth straight year of budget surplus. So, by the numbers in 2001 we had a 127.3 billion dollar budget surplus. Then, the catastrophe occurred with George W. Bush who within 1 year managed to go from a 127.3 Billion dollar surplus to a 157. 8 Billion dollar deficit and 374 billion dollar deficit in 2003 and 413 Billion dollar deficit in 2004 . By 2009 we had a 1416 Billion dollar deficit. If we add up all the yearly deficits for George W. Bush we will come to a monstrous 3544.8 Billion dollar budget deficit in 8 years. How did that happen? Tax cuts and 2 wars. So what can we do right now? Let's go back to the household example that I mentioned earlier. If a household is facing a growing debt that they must pay, they try to raise their income and not lower it. Imagine if you are at the dinner table looking at bunch of bills and you are trying to figure out how to pay for them and your husband or wife comes to you and tell you that he or she figured out a way to pay those bills. You look up excited and then he or she tells you that they decided to work part-time. Of course, you will be mad because it does not make sense and you would be absolutely correct because it does not. When facing a big debt, you must increase your income and not lower it. Government relies on tax for its income and therefore, taxes must be raised.

We need to establish the fact that a lower tax to the rich does not mean the creation of jobs. We had 8 years of lower taxes under George W. Bush and we did not create any jobs. In fact, we lost jobs. Just from the end of 2007 through January 2009 there were over 4.5 million jobs lost during that period. And about 2.7 million manufacturing jobs were lost since Bush took office to January of 2004. 47,000 factories closed during the Bush administration. The fact is, numbers do not lie and the numbers do not support the claim that lowering taxes for corporations or the rich create jobs. In fact, it points to the opposite. Any corporation or a business owner does not start a business to hire people. They start a business to make money. So, if they get more money, that extra money goes to the bank and that does not create any jobs. Republicans claim that money trickle down but that has never been the case in this capitalist economy. Money flows upward. When consumers have a lot of money, they go and spend it. They spend it on buying things that have been manufactures in companies. So, when there is a higher demand for products, the companies will hire more people. That is how a job is created. So, to create jobs, you don't give tax cuts to the rich. That has never worked and it will never work. The money must be aimed toward the workers and the consumers and not the rich people.

To make matters worse and more ironic, corporations are taking the money they are not paying for taxes, and lending it to the government. Then they require the government to pay it back with interest! Does that make any sense? In other words, they are charging the government for the money they owe while it should be the other way around. It is completely nonsensical and preposterous to continue that way. We should not be cutting the taxes for the corporations or the rich.

We must raise taxes because that is the only way we can get this country back on a true way to economic recovery. Raising the taxes is fiscally responsible; it is fair and makes mathematical and economic sense. Not only that but it will help to create jobs, lower the deficit, increase the government's income which ultimately result in an economic growth. This will also lead to help in working on the country's infrastructure so we can improve, maintain and build highways, which of course will create more jobs. Higher income also means more spending on education which means a brighter future for our children.

Sources:

http://www.worldwide-tax.com/

http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes_print.html

http://www.forbes.com/lists/2009/18/global-09_The-Global-2000_Counrty.html

http://www.davemanuel.com/history-of-deficits-and-surpluses-in-the-united-states.php