What might happen if the richest people in the United States were to pay the same or similar tax rates as the poor and the middle classes? Why is it that the wealthy end up paying so few taxes?
According to the nonpartisan Institute on Taxation and Economic Policy, the poorest 20 percent of households pay on average more than twice the effective state and local tax rate (10.9 percent) as the richest 1 percent of taxpayers (5.4 percent).
Furthermore, Good Jobs First and the Keystone Research Center believe that if tax laws were changed to compel the highest income earners to pay the same rate as everyone else, states and localities would take in up to $128 billion a year in fresh revenue and if just the top 1 percent of earners were compelled to pay the typical middle class tax rate, the report concludes that the change would bring in more than $68 billion in new annual revenues.
How is it possible that in a democracy there be such a legal favoritism of the rich? What is the reasoning to reduce taxes for the rich and maintain or increase them relatively speaking for the poor and the middle class?
Well, if you are a Chicago School economists you will probably argue that for the economy to grow you have to give the wealthy a break. The problem with that is that the poor and the middle economic groups need income to buy what the giant corporations produce.
What was Henry Ford’s thinking when he decided to produce cars not just for the rich?
But you also have to bear in mind that everybody’s taxes go (or don’t go) into programs that have to do with the welfare of citizens, from roads to schools and access to health and the astronomical budgets of maintaining the country’s wars and involvement abroad.
If the equation were to be turned around so as to make it more equitable, there would be billions available for roads and schools and other social programs aimed at reducing the enormous income inequality which presently persists in the country. But conservative—as well as “liberal” economists—are apparently afraid that raising taxes for the rich would lead to an economic slowdown. Is there reason to believe that or is it just the result of economic and political dogma?