( Should the Government rais taxes on wealthy people ) Term Paper Outline I. Describe a situation II. Hypothesis Yes or No, government should rais taxes on wealthy people. Evidence: III. Background...

SHOULD GOVERNMENT RAISE TAXES ON THE RICH? AN ANALYSIS

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Reasons Why the Government Should Raise Taxes On the Rich
SHOULD GOVERNMENT RAISE TAXES ON THE RICH? AN ANALYSIS

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Describe a situation
President Bush in 2001 and 2003 introduced huge tax cuts for all the classes of the society and
especially to the wealthy class. But this tax cuts eventually resulted in huge financial deficiency
in the realm of the U.S economy in the year 2009. Such dire consequences of tax cuts enforced
President Obama and other statesmen to propose the abolition of the tax cut policies of ex-
President Bush on the wealthy class. President Obama argued that the abolition of tax cuts on the
wealthiest sections of the country and the introduction of a raised level of tax on them can
generate a huge amount of revenue which can be reinvested to cope up with the deficits in the
U.S economy.
Hypothesis
The pivotal endeavor of this paper is to propose facts and arguments which can reveal the
necessity of introduction of a system which will be able to raise the rate of tax on the rich class
of the U.S society. Government should impose high rate of taxes on the rich not only to cope up
with economic deficits but to sustain the concept of economic equality and social justice.
Evidence
There are evidences which can speak in favor of increase in rate of taxes for the rich class of the
society. It cannot be denied that both President Roosevelt and President Clinton were able to
bring some stability in the economy by introducing high taxation on the rich and their policies
proved to be success. Moreover, it will be fallacious to project that it is not worthy to increase
taxation on the rich as it can have a deadly impact on the small business owners as because “a
recent Treasury analysis finds that only 2.5 percent of small business owners fall into the top two
income tax brackets and that these owners receive less than one-third of small business income.”
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(Bouie, 2012) So, in this respect to there should not be any reason why the government cannot
impose a higher rate of tax on the rich by eliminating the policies of tax cuts on their income.
Background:
History of Tax
The initial tax systems adopted by the U.S Government in its first 150 years or so were
different from the present systems. In the initial stages the government was in favor of indirect
taxation which encompassed taxes on imports and excise taxes. Till the 1900s it was the tariffs
which played an important role in the U.S tax system. More than eighty percent of the
government receipts, in the 1800, were comprised of the custom duties. On the other hand excise
taxes on alcohol, till the early 20
th
century, primarily constituted the internal revenue collections
which excluded tariffs on imports. Apart from alcohol, excise taxes on tobacco were also a
formidable source of revenue for the U.S Federal Government. The framers of the Constitution
were cautious about vesting the power of taxation with the government. They were cautious
because they were thoroughly aware of the fact that it was the corrupt system of taxation
imposed by Britain which ultimately paved the way for the American Revolution. In order to
avoid any further tension within the nation the framers of the Constitution did believe in the
decentralization of the taxation system and hence, delegated most of the public revenue
collection to localities, and such taxation depended majorly on property taxes.
The mode of tax collection in the initial stages was also divided according to period of
peace and period of wars. When peace reigned in the nation the government collected tax
through modest tariffs and excise taxes but during the periods of war, including the War of 1812,
taxes was raised temporarily in order to meet the war expenses. After the end of such periods
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taxes were again reduced and it was specifically due to public opposition to high rate of taxes. In
relation to the war periods a major change in the taxation system was brought up by the Civil
War which actually initiated hike in both the tariff rates and excise taxes. Revenue collections of
the government also increased in a considerable degree between the year 1863 and 1866. It was
again the Civil War which initiated the formulation of the national income tax. But such income
tax’s rates were low in comparison to the rate of this modern period. Merely ten percent of the
households were subject to any kind of income tax. And by the year 1865 over twenty percent of
the federal revenues came from the income tax. Though the income tax generated considerable
amount of revenue, it did expire in 1872.
It was the Populist movement of the late 1800s with which the thrust for the modern
federal income tax rests. The regressive tax system based on excise taxes on alcohol and tobacco
was a major reason behind the Populist revival of interest on the collection of revenue from an
income tax. The income tax, according to the Populist movement, was a progressive tax which
was based on the ability to pay. There was another reason for the re-introduction of the income
tax. The income tax was a means to demolish the framework of excessive monopoly of profits
and the concentration of wealth and power and through such demolition the income tax was
meant to be a vehicle of social justice. A federal income tax which was instituted in 1894 was
ruled out to be unconstitutional by the Supreme Court in 1895 and efforts were generated in the
following years for bringing up constitutional amendments for the re-establishment of a federal
income tax. With the defeat of such efforts the urge for the introduction of an income tax system
grew in a rapid manner in the political realm of the country. Such hike in efforts to introduce the
income tax ultimately resulted in success and in 1913, through the 16
th
Amendment a legal basis
for the federal income tax was formulated. But thought the legal basis of the income tax was
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introduced, it failed to generate sufficient revenues as it was mainly targeted towards the wealthy
class and only about two percent of households paid any income tax.
It was the administration of the Woodrow Wilson which transformed the entire
framework of the income tax to finance the First World War. The transformation was based on
the dual desire of enforcing social justice and increasing additional revenue apart from what was
generated by...