The Fairness of Progressive Taxes

Opinions on Debatable Issues #5

Progressive Taxes is a taxation system that imposes different tax rates based on the taxpayers’ financial ability with low-income individuals paying fewer taxes. Tax brackets are used to group taxpayers by income ranges. The money the individual earns places him or her into a bracket, resulting in a higher tax rate once the dollar amount hits a new threshold. Some misunderstand progressive taxes by thinking that if their incomes reach the bracket that imposes a certain taxation rate, they have to pay that percentage of their total income as tax. However, progressive taxation only requires the amount of money that reaches the bracket threshold to be taxed at that rate. For instance, if a $20,000-$40,000 bracket has a taxation rate of 20%, someone that earns $24,000 will only have to pay 20% of the 4000 dollars that reached the $20,000 threshold. The first $20,000 will be applied to whatever tax rate is for the below $20,000 bracket.

First and foremost, it is a moral obligation for the more well-off individuals to help restrain disparities in income and help provide revenue to make public services available to all Americans. According to americansfortaxfairness, the richest 1% of Americans own 35% of the nation’s wealth. The bottom 80% own just 11% of the nation’s wealth. Furthermore, according to the Pew Research Center, The poorest half of Americans have only 2% of all wealth, half as much as their parents had 25 years ago. Meanwhile, the share owned by the top 1% of families has increased by 32%, showing the exacerbation of economic disparities in the US. By imposing progressive taxes, we can create an environment that successfully abridges this social gap and creates more equal opportunities for everyone. The poor and the wealthy are all part of this country and society. Helping those that are most vulnerable when having the ability is both moral and necessary. It also creates a more united community that can strive for prosperity as a whole without the poorest portion lagging. Since the wealthier people are the members of the society, they are obligated to help their neighbors.

Second, Progressive taxes are fair because they help correct unfairness that exists in society. We do not have the same starting line because of race, gender, religion, sexuality, appearances, family background, and so on. The poorly experienced unfairness since they were born and a great part of their poverty can be ascribed to unequal opportunities. So having the wealthy use the money they earned from their privileges to help those that are unprivileged is fair. It is ungrounded to say that it will be a burden for the wealthy. Even with the higher tax rate, they will be fine; billionaires like Warren Buffett and even Mark Cuban attested to this, saying that they would be willing to pay more in taxes. On the other hand, for the government to provide “basic housing, nourishment, health care, and education” to the rest of its citizens, money is needed, and it comes from taxing the most well-off people. For the most fortunate to fail to correct the unfairness that exists in society long before we are born would be a moral failure.

Third, progressive taxes are fair because they are repayments to society. Many argue that fairness means that we reap the rewards of our labor, that what they earn inherently belongs to them. However, things that contributed to their success are not just their hard work. If the society did not provide them with the opportunities and resources, none of their current prosperities would exist. According to Melinda Gate, Bill Gates and Warren Buffett said that they could not have done what “they did without having grown up in the United States, benefiting from the United States education system, benefiting from the infrastructure that exists here to build a business.” In short, they could not have done what they did without the help that the US and society provided them. It is thus a fair repayment of what the society gave them in the first place to build up their success to help the economy and contribute to society’s welfare by helping those that are least well-off.

Fourth, fair means consonant with merit or importance, according to Merriam Webster. So let’s examine whether a flat tax fulfills this definition. Are the richest deserving of their wealth based on this? Are their wealth gained only from their merit? No. Cornell University economic professor Robert Frank said that “we often dramatically underestimate the role of luck in our success”. Luck began far before we were born. Qualities like smart, inclined to work hard, and ambition are all unknown mixtures of genetics and environmental factors. You didn’t choose where to be born, you didn’t raise yourself, or provide the genes that made you who you are. There is no such thing called “self-made” in reality. Therefore, for the more wealthy people to hold on all their belongings and pay the exact amount of taxes as others when their success is largely based on luck that others don’t have, instead of merit, would be contracting the very definition of fairness.

Fifth, progressive taxation, which is simply taxing the wealthy more, is beneficial to the economy. “The money allocated to programs such as affordable healthcare, Pell grants, food stamps, and Earned Income Tax Credit – or given to working- and middle-class Americans through tax cuts – will be redistributed into the economy and stimulate growth.” This has been proven by history: President Clinton raised the top marginal income tax rate from 31 to 39.6 percent. Subsequently, the GDP growth reached 4 percent every year in his second term. In contrast, President George W. Bush’s tax cuts led to no significant economic growth and eventually recession. Because middle- and low-income families spend a greater portion of their incomes than the very rich do, distributing money to them would increase economic activity, let more money would recycle through the market, and stimulate national economic growth.

Some argue that taxing the rich people more of what they earn will diminish innovation and cause inertia. However, despite money being a big incentive to work hard, it is not the only one. Many people pursue more than just material gains but accomplishments and contributions to human development. A wealth tax will not reduce any of those other motivations; in fact, it might galvanize the lazy offspring of millionaires to do something in an attempt to maintain their wealth and even earn more.

Some also argue that wealth is the reward of labor and hardworking. However, that is usually not the case. Many rich are passing wealth to their heirs tax-free, creating a new American aristocracy with vast fortunes, while millions of Americans remain homeless. And those who inherited that wealth can use that to make more fortune in a way that is much easier than grassroots. As Alan Kalake said, “There is a need to distinguish two types of wealth … the wealth that is earned … (vs.) that which is inherited… Each member of society must contribute to society’s wealth by building their own and sharing.” Therefore, imposing flat taxes is unfair to those who are born in lower social classes.

Lastly, I want to clarify that fairness does not mean equal and same. Just like a competition between a disabled man and a healthy man. Fairness means giving some extra help to the disabled man (born poor) or imposing some limits on the healthy person (born wealthy), like imposing progressive taxes. Requiring a flat tax will be unfair because that is like requiring the disabled man to race the healthy man with no assistance at all.

In conclusion, progressive taxation is a fair system that keeps the wealthier people accountable for their moral obligation and rightful repayment to society while adhering to the very definition of fairness.

Sources:

• https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-taxing-wealthy-americans/#:~:text=The%20richest%201%25%20of%20Americans,the%20top%20rate%20is%2043.4%25.
• https://www.marketwatch.com/story/why-raising-taxes-on-the-rich-isnt-so-crazy-2019-12-09
• https://www.theperspective.com/debates/businessandtechnology/raise-taxes-rich/
• https://www.investopedia.com/ask/answers/042415/what-are-differences-between-regressive-proportional-and-progressive-taxes.asp
• https://hbswk.hbs.edu/item/how-should-wealth-be-redistributed
• https://www.nytimes.com/interactive/2019/04/15/magazine/melinda-gates-foundation-interview.html
• https://economics.mit.edu/files/335

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