Sample Paper on Tax Justice Debate in the United States of America

Policy Analysis

Tax Justice Debate in the United States of America

This debate is a close examination of the tax justice in America and focusses on the need for taxation (Thorndike and Dennis 78). Economists argue that a good tax system is one that is efficient and equal to all citizens irrespective of their financial status. They have argued that those who earn more income should have pay more taxes while those that earn less should pay less taxes to promote equity. When it comes to efficiency, a good tax system is one that imposes minimal or zero liabilities to the payers as well as the collectors, in this case the government. In the recent past, in fact after the Second World War, the United States of America has been concentrating on efficiency of the tax types that are imposed to various payers. Specifically, PAYE is taxed on the employees who are employed by the state government, depending on the amount they receive as income. In logic, PAYE should increase with increase in income and thus the wealthy should pay more that the poor.

However, there has been a debate in the state about the existing rates of tax that has continually been imposed to the personal incomes of individuals. One side argues for increasing tax rates imposed on income, on the wealthy so that the government can distribute the revenues again from what is collected to the poor. The other side argues for reduced tax rates because when people retain a greater share of their income, they are more motivated to work, increasing overall production and prosperity in the economy. However, those who support the incremental effect on the tax rates of the wealthy argue that it would be fait because it will promote equity in the economy. It is logical because the poor will pay less taxes that the wealthy, and thus the government will use the revenue obtained from the high taxes collected form the wealthy to provide some essential services to the poor. Equity will thus be observed, which in turn equalizes the two social groups in the society; the poor and the rich (Poterba 105).

They argue that it would be unfair for the rich and the poor to have an imposition of equal tax rates yet they do not earn amounts of equal levels. Instead, this extends the existing financial and social gap among society members. This is because the poor will feel the effect of those taxes more as high amounts would be deducted from their personal disposable income, leaving them with less amounts to consume. In addition to this, the overall effect that would be witnessed in the country is that the economy will go down because there would be fewer investments from the poor, as they would use all the income left in their hands for consumption. Those who support the increase in the tax rates of the wealthy justify their argument with the need to maintain progressive equity of personal income taxes (Oates 109).

There are those that argue that the rates should be decreased because people will retain much of their incomes and will get a source of motivation to work, therefore, increasing economic growth. They argue that tax liabilities will be few and thus efficiency realization becomes easier. This efficiency in return makes the economy grow at a higher rate. They ignore equity of the system arguing that the World War II drastically affected the economy of the state. Therefore, they see a need to respond urgently to the problem, which will be solved by concentrating on the efficiency of the tax system, rather than equity of the system (Summers 123). When people retain much income in their hands, they are motivated to work harder, thus improving the economic growth of the country. This makes them believe that if the government pays more attention to the equity of its tax systems, the economy will continue to experience some distortions.

In conclusion, the US citizens should take it as an obligation to take care of the less fortunate members of the society and try to equalize the distribution of income. This calls for the wealthy people to accept higher tax rates so that they contribute more revenue to the government so that it could be used to provide some of the essential needs they require for them to live. Other ways that they could show care to the less fortunate in the society could be by organizing walks to collect money from well-wishers that would be used to improve their living standards. Another way they could take care of the less fortunate is by sponsoring children who come from less fortunate families in their education. They could also offer some jobs for them so that they could get a source of income to support themselves as well as their families thus independence. This would not only improve the living standards of the less fortunate but would also improve the economic growth of the country.





Works Cited

Oates, Wallace E. The Economics of Environmental Regulation. Aldershot: Edward Elgar, 2005. Print.

Poterba, James M. Tax Policy and the Economy: Vol. 17. Cambridge, Mass, USA: MIT Press, 2003. Print.

Summers, Lawrence H. Tax Policy and the Economy. Cambridge: National Bureau of Economic Research, 1997. Print.

Thorndike, Joseph J, and Dennis J. Ventry. Tax Justice: The Ongoing Debate. Washington, D.C: Urban Institute Press, 2002. Print.