The rich have been getting richer and the poor have been getting poorer. Raising taxes on the wealthy will help fix this problem as it will take some of that extra money, and be used to improve social welfare. In the 1920s, there were many different tax cuts. The first cuts began in 1922, and continued to occur throughout the 1920s (Crawford). In 1925, the government was encouraging a growing gap between the rich and everyone else because of the tax cuts that benefitted the rich.
1. Tax Cuts Caused Income Inequality Income inequality is a big problem in the United States because the top, wealthiest American saw huge increases in their incomes, which the rest had their incomes go down. Bottom people do not have the same amount of money and the opportunity to move up the social ladder as the rich people do. In order to reduce income inequality, the government needs to tax the rich people more, and give poor people more money and more social services - education, food subsidies, health care. Tax cuts are only benefiting the richest people, and will widen the inequality gap between the rich and the poor.
Krugman points out how despite the obvious and ever growing gap between the rich and middle class in terms of wealth increase, Republicans tend to vote for tax cuts for the rich and for decreases in funding for programs that benefit the middle and lower classes of society, such as Social Security, Medicare, and Medicaid. Cutting funds for these services puts the middle and lower classes at even more of a disadvantage than they already were. Meanwhile, the rich receiving more tax cuts means they receive more money, furthering the economic wealth gap and increasing the money they can spend to influence politics. Krugman suggests the solution to the problem is increasing taxes on the
Currently, those with greater wealth pay much lower taxes, then those of middle class and the poor (Friedman, 2012, p. 189). According to Miller, President Obama proposed a higher income tax bracket for those making over $250,000 a year which would possibly bring about $1 trillion dollars over the next several years (2012, p. 63). This money would help in closing our federal deficit and bring down the amount we owe in federal debt. Many programs have experienced funding cuts due to our deficit being too high and not enough funding to cover this deficit. Our federal debt is $17.1 trillion and experiencing further growth as we speak (Duggan, 2013, Lecture 7, para.
The major disadvantage of debt capital is that you now owe money. It may seem pretty obvious; if you borrow money you will then owe the money. Interest rates and the cost to borrow can change rapidly as demand in the economy changes. Not only can increases in demand raise interest rates rapidly, inflation caused by devalued money can cause interest rates to skyrocket. The business owner may end up having more debt than they planned for (Home Business Magazine, 2013).
The income gap is actually not staying where it is or getting smaller, it is growing. For this reason the middle class can be grown to decrease the income gap. At a local level the inequality grew from ‘07-’12 mainly from the poor getting poorer, not the rich getting richer (“US Income Inequality”). Some people might wonder, if this is true only at a local level, then how is income inequality growing nationally? To answer this question, rich people are gaining even more wealth at a national level while people that are poor are falling deeper into poverty at a local level (“US Income inequality”).
The gap between the rich and poor that has continuously increased throughout the decades makes it even more challenging for an individual to jump from the poor class to the rich. The rich, receiving large tax breaks, stay rich. This leaves the Americans in the poor class to carry the burden of the heavier taxes, leaving them in the same class with little to no hope of becoming rich and obtaining the American dream. In addition, delaying and denying citizenship to immigrants hinders their ability to obtain wealth and the American dream. Low wages also decreases the ability for many Americans to gain a higher education, decreasing the likelihood they will receive high wages and the American dream.
In other words, “lower income people pay a greater share of their income sales and payroll taxes than higher-income people” (Henchman). In America, the wealthy are being favored while everyone else has to pay. While hard to believe, education and inheritance may play a role in the increasing wealth gap in the U.S.; along with the government’s flounder... ... middle of paper ... .... "Bailing Out Capitalism." Current History 112.757 (2013): 304-310. Academic Search Complete.
The purpose, in theory at least, of ending double taxation is to put more money in the hands of investors, and to encourage more Americans to invest in the ailing stock market, which is now near an all-time low. Another beneficial effect will be to encourage large corporations to pay dividends, thus giving more money to Americans. If this money goes towards consumption and private and capital investment, the economy will inevitably get a much-needed boost, since GDP=C+I+G+X. In addition to elimination of dividend taxation, the Bush plan proposes to make the 2001 tax cuts permanent. Again, one can argue that the wealthy are the primary beneficiaries of Mr. Bush’s tax cuts.