The increase in taxes to those wealthy Americans will have a statistical impact on the growth of the economy and to its driving factors including the savings, investments, labor supply and the productivity growth. Having high taxes on the wealthy helps in financing more in investments that are found in different fields including those investments in the education, scientific research and infrastructure of which are critical to the growth of the economic prospects especially those in the middle class. It is possible because the high taxes on the wealthy leaves the country with much to spend on other main activities in the economy that provide income to the low-income earners. This leads to growth of the economy. The government comes up with economic activities such as the construction of roads and other critical activities while employing citizens who make income from these activities thus improving their living standards (Rowley & Friedrich, 20).
The high taxes on the wealthy also allows those on the middle class to be charged lower taxes such that they are they are left with enough purchasing power that is essential for keeping the economy growing. The government ensures that those earning in the middle class are charged less such that they are left with enough to spend in their daily activities and to sustain the small businesses that they have. The small businesses owned by these middle-class people contribute largely on the growth of the country’s economy in many ways. The middle class in any country is the greatest in the population, and therefore, most of the money circulating in the economy comes from this class (Rowley & Schneider, 34).
The disposable income should not be concentrated on the top, and this is because it leaves the middle class with less money that is not enough to boost the economy. Since most of the population in a country consists of those in the middle class, the level of innovation is also very high at this level. Most the people in the middle class are innovative and will always grab each opportunity they will grab every chance they get in the market. These people are aware of the competition in the market and will, therefore, work hard to come with unique goods and services that will make them survive in the market. In this way they will increase the job opportunities and the unemployment in the country will be reduced (Marino, 8). The middle class will be motivated, capable of improving their lives, accessing good education and thus improving the economy.
The savings and investments are increased. As a result, tax increases on the high-income people. It is possible because this increases dividend tax rates and leads to increases in the capital gains. Despite them having reduced savings in the private sector, the revenue that is generated from this saving is high such that it helps in making investments that are more worth than the private savings. When the income is used well, it helps in making maximum investments that are capable of reducing unemployment level of in the country thus leading to the improved growth of the country’s economy. Public saving is increased from the capital gains, and this may or may not have the effect on the private savings. The public savings and investments lead to more business activities and through this, there are positive impacts on the national saving and investment.
The raising of the top marginal income tax rates has a great impact on the small business owners. In the United States, most of the jobs are created by the small businesses. Therefore, improvements on them will lead to economic growth. The small business owners will be left with high disposable income in which they can comfortably invest in their target companies to make more profits (Boortz, Linder & Woodall, 53). The small business that cover a significant portion of the economy will increase and this will lead to improved standards of living. It will result to many individuals being able to make their living meaning that the government will concentrate on other important issues in the country. The United States government will, therefore, use the money that it could have spent on donation with other income generating activities in the country such as improving infrastructure, which is also a source of employment to the citizens. The small business will continue to increase as the taxes are increased and this means more incomes are being generated. The start-up ventures will also be created, and this will stimulate the growth of Gross Domestic Product (GDP) of the country (Rowley & Schneider, 45).
Entrepreneurship will also be encouraged by charging high-income earners high taxes. Many people will be promoted to start own businesses because high taxes will lead to reduced volatility. This is because the government will be bearing some of the new risk’s venture for example by allowing tax deductions for the losses made and receiving proportions of the returns. The dividends and the current preferential tax rates on capital gains are also responsible for stimulating the investments in the new ventures. Individuals on being aware that their taxes are low, than those at the top, will be motivated as they know they have a good government charging them low just to make them improve their activities. Self-employment will highly result from the increased public saving ad there will be more economic activities thus leading to the improved economy of the country (Boortz, Linder, & Woodall, 17).
Growth and availability of jobs are closely related to the increase in the taxes charged on the high-income earners other than cutting off the taxes from the middle-class earners. The high tax costs in the United States can be seen to be compatible with the Gross Domestic Product growth and the job creation. High taxes mean that there will be more revenue gain resulting from this activity. More revenue generated will then be used to reduce the budget deficit. This tax increase will be used to fund or even forestall cuts in those productive public investments that in the areas that support the growth of the economy. These sectors include the basic research, infrastructure and in areas of public education.
It is time for the high-income earners and the wealthy corporations the America to ensure that they pay their fair share of the taxes requested to pay. They should not take the unfair advantages of the many loopholes that are found in the tax code (Hacker & Pierson, 65). Their effective compliance will reduce the chances of cutting education funding of the students in the United States, and this also minimizes the cutting of the Social Security and Medicare of the citizens. When the high-level income earners comply with the taxes set for them the security will be sufficient, education will be adequate for all the people in the United States and the level of the economy will be seen to rise (Boortz, Linder, & Woodall, 22).
Several measures can be put to help reduce the number of the highly paid individuals that avoid the taxes. Some of the methods that can be used include strengthening the estate tax such that even those ultra-rich people will pay the inheritance taxes and will not take advantage of the high exemption levels of the property tax (Hacker & Pierson, 19). Other ways that can be employed are those measures that are aimed at closing all the loopholes that allow the wealthy people avoid capital gains taxes by ensuring that they hold their assets until they die and as a result their heirs end up escaping taxes that could be charged from these achievements. It is estimated that this will raise up to $650 billion over the next ten years (Hacker & Pierson, 34). These will be well used I the economic growth activities that will provide employments to the United States citizens as well as provide quality security and education to people.
When all the loopholes are eliminated, the government will have enough taxes to cater for many if not all the important economic activities in the United States and the economy of the country will rise. From the past years in the United States, it is evident that growth of the economy of the country does not trickle down from the top. Instead, it rises upward from those people working and are adequately educated, well rewarded and those that have a feeling that they have a fair chance and what it takes to make it in America.
Works Cited
Boortz, Neal, John Linder and Rob Woodall. FairTax, the truth : answering the critics. New York: Harper, 2008. Document.
Hacker, Jacob S and Paul Pierson. Winner-take-all politics : how Washington made the rich richer-and turned its back on the middle class. New York: Simon & Schuster, 2010. Document.
Marino, Rich. Submerging Markets. Houndmills, Basingstoke: Palgrave Macmillan, 2013. Document.
Rowley, Charles K and Friedrich Schneider. The encyclopedia of public choice. Boston: Kluwer Academic Publishers, 2004. Document.
