All posts edited by Madeline Ricchiuto.

Tuesday, March 5, 2013

US Economy, Revenue, and Taxes

As almost everyone has probably heard, the sequester cuts have taken effect in the US. This has spiked an increase in attention to tax policy, because President Barack Obama and the Democrats have said that they will not accept any policy that does not have in it tax increases on the wealthiest of US citizens. Republicans on the other hand have said that they do not support any measure which attempts to raise taxes, especially on the rich because the Republicans consider them the job creators.

This is a major divide in US politics, and an extremely polarizing issue. This isn't anything new, but is being put particularly in the spotlight because of these recent events. I think now is a very good time to share some very important facts about the current state of the economy. Particularly in reference to the distribution of wealth and how this is or should be reflected in the revenue and tax policies. For starters why don't we start with the following video :

This video is extremely revealing. Now of course again, its nothing new to say that there is income inequality in the US, and that people don't quite know exactly how unequal it is. However, the difference in perception and reality is staggering. This video breaks up a chart which for many people makes it seem not so bad and displays the same information in a different way.

There are a few very important things to take away from this video when talking about current policies. First is to notice the extreme disparity in who actually has most of the wealth. Looking back at the video the bottom 80% of americans, the poor all the way to the mid middle class, have about 7% of the nations wealth. Let me repeat that, SEVEN PERCENT of the nations wealth goes to EIGHTY PERCENT of the populace. Just those numbers sound scary. Where does the rest of the money go? Well the top 1% of the population has 40% of the wealth. That means that the 19% between those two has 53% of the nations wealth. Some very interesting statistics there for the distribution of wealth.

How does this affect revenue and tax policy? Well wouldn't it make sense to tax those who have the highest percentage of wealth the highest and the lowest the lowest? I dont' know about you, but to me that seems to just make sense. Republicans have been complaining that the lowest 20% of Americans get more tax breaks than they pay in taxes and so get money in return. Do you still have that image in your head of how the wealth is distributed? Here let me remind you: 

Can you see how much wealth the bottom 20% have? It looks like almost nothing to me. Most of them are below the poverty line. That means that they don't even have the minimum amount of money deemed necessary to survive. How then is it wrong that the government is giving them some money back? Isn't that the responsible thing to do? To help them? You may say that you are only feeding whatever is the cause of them being in the bottom 20%, but that is something you can't know. And I would argue giving them a chance to use the money responsibly is better than not giving them the money at all.

Many republicans have also complained that the money being paid because of taxes is at its highest since 1976. I find this an interesting complaint. They aren't complaining about the tax rates. They are complaining about the amount of money paid. Again I ask, isn't it right that if you have more money you should pay more in taxes?

So somebody who made $100 dollars should pay less than somebody who made $10,000? Right? I think everybody agrees with that. Remember: the top 1% alone takes home 24% of the income up from the 9% in 1976, it makes sense to think that the rest of the upper class is too don't you think? So then why is it wrong that those who have the most money are paying more money than they have ever before, when they are gaining and have more money than ever before? It really just doesn't make sense as a complaint to me.

Another interesting statistic revealed in the video, is that the CEO of a company makes on average 380 times that of their average employee. I'll clarify like the video did...not the lowest paid in the company, just the average worker. Doesn't it make sense then that they should be paying roughly the same number of times in taxes? Wouldn't that be economic consistency?

Pictures such as the above are used to promote the conservative position that the rich pay enough in taxes. However the image forgets to address that the top 20% of americans control 93% of the country's wealth. So I'll end asking once again the same question: Shouldn't a truly fair, and just tax/revenue system be one that is reflective of the reality of things?

You can see more on how some conservatives are pushing their side here.
You can also see my own idea on how to boost the economy here.

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