A rising tide lifts all boats.
I’d like to consider the effect of raising taxes on high-income individuals – on the rich. If we raise taxes on high-income individuals and give a matched cut to lower-income individuals, a higher percentage of total income will be spent, increasing the multiplier effect and creating additional demand. This additional demand will allow high-income individuals to do higher volume and earn more money. And it won’t hurt the poor, either, or affect revenues.
First, let me acknowledge the brilliance of political savant Jay Billington Bullworth;
"Obscenity?
The rich is getting richer and richer and richer
while the middle class is getting more poor
well my friend if you weren't already rich at the start
well that situation just sucks"
Besides sucking for all but the rich, is this the best strategy for the rich? The Bush tax cuts have greatly benefited the rich at the expense of the middle class and poor. While the rich have indeed getting richer, the poor are also getting more poor. Between 2001 and 2007, the top 1% income went from $292k to $409 (40%), while the 50% income went from $28k to $32k (14%). Inflation over this period was 20.2%, so the poor have lost to 6% inflation while the rich have prospered at 20% over inflation.
If we tax the rich an additional 5%, it should return about $2.5 trillion over ten years. If we gave the middle class and poor a corresponding tax cut, it would put $2.5 trillion in their pockets. My back-of-the-envelope figures indicate that this would cost high-income individuals about $8k a year and give the middle class and poor about $850 a year.
On income of $1,000,000 a year, an additional tax of $5,000 would be imposed. Yes, this is in addition to a myriad of other state and local taxes, but I find it illogical that it would cause pain.
On the other hand, $850 a year ($70 a month) to everyone in the middle and lower economic ranges would be extremely welcome. While the income after inflation has risen dramatically for high-income individuals, it has been flat for the middle class and poor for the last decade.
Oh – how about making the rich richer?
The middle class and poor have little disposable income. After food and housing, many families have little money left. They have demand; they currently just don’t have the money to purchase what they’d like to demand. If you give them money, the money will be spent.
A financially comfortable middle and lower economic classes is essential to good business and good profits. If you make something that isn’t too esoteric, the key to making money is more volume. If the middle class and poor have no money, they cannot demand. Putting money in their pockets – from yours – will allow you to refill your pockets when they buy your products.
Tax the rich to make them richer!!