Middle class in the United States
Understanding how increasing taxes for the rich can harm the middle class in the United States
In the United States, taxes are imposed on three different levels – federal, state and local (Pratt & Kulsrud, 2010). These included taxes on property, income, sales, payroll, gifts, imports and various other things. Corporations and individuals pay taxes based on their net income to some local governments, states and the federal. There are different types of tax payers; they all differ depending on their property, work, lifestyle, organizations and other things. Increasing taxes for the wealthy will only harm the middle class within the United States.
Over the years many economist have suggested ways to improve the situation of the country. A lot of debates have gone on in regards to taxation and who pays what. Many households would agree that the whole taxation system is in itself unfair on a lot of individuals. Economists debate over the best solution for strengthening the already weak economy (Pratt & Kulsrud, 2010). However, playing around with the country’s taxation system could lead to a distortion within the market. Something like this could encourage the formation of so called financial bubbles.
Those who are in the upper class would account for more of the consumption of goods in the country. When it comes to sales tax, the rich pay more since they buy more things. However, when it comes to income taxes, it is a different story. The wealthy in the United States have more freedom when it comes to their assets. They are able to make ways to keep their taxable income low. That is, if they want to minimize the taxes that they owe. Those in the middle class would probably think this is unfair.
A lot of people believe in the type of logic Robin Hood had. Steal from the rich and give to the poor. Many folks think that the solution for distributing wealth would be to impose higher taxes on the rich. However, this concept is very flawed. It could actually do more harm to people who are sitting in the middle class, working a nine to five job. History would suggest that lowering taxes on the wealthy brings in more growth and investment (Pratt & Kulsrud, 2010). This is something that would be in favor of those weak economies. The rich are very mobile and footloose, they are free to move around wherever convenient for them, thus taking their money and taxes with them.
The wealthy people in the United States account for about one third of the economy’s taxes, a very hefty amount. Increased taxes on the rich will likely decrease consumption and allow room for deviant behavior. When the rich change their buying patterns, this can distort the overall economic activity. Top earners will begin to alter how they spend their income, maybe even how they produce it. Since the rich do account for a large sum of the economy’s income and taxes, a shift in behavior will most likely take an impact on the market and affect mostly the middle class.
In the United States, the spending patterns and lifestyle of the wealthy cannot be distorted or startled. If higher taxes are imposed on the rich, the middle class will have to suffer paying more for other things. The economy is distorted by the incentives that taxes create. If an activity has higher tax, that activity becomes more expensive, if it is more expensive, not a lot of people would like to take part in it. Thus, the patterns and trends of the economy would be unstable, forcing the government to impose taxes on other things such as goods. When this is in effect, the middle class would be limited in their consumption because market prices would go up. Imposing higher taxes on the rich will take its toll on the middle class who would then have to increase their spending to make up for the shift in the behavior of the upper class.
Pratt, J.W., & Kulsrud, W.N. (2010). 2010 Federal Taxation (4th ed). New York, NY: Custom