The issue of tax reform has been widely debated in the news and among citizens of the United States. The income disparities between American citizens come down to several institutional and social factors, such as age, gender, race and generational wealth. Income inequality comes as a result of capitalist forces economically speaking and social inequalities that create barriers for some groups, namely minority groups, to see equal opportunity in employment and earning money. Income differences is strongly linked to wages and taxes; thus, tax reform must address these inequalities in order to reduce it. This position paper will argue that a more progressive tax system must address such inequalities, how the federal government should support such an endeavor and how addressing income disparities through tax reform can enable social cohesion.
A progressive tax system, as explained by the Internal Revenue Service, is based on the concept of ability to pay, taking higher taxes from high-income people than low-income people, lessening financial burden on the latter. While it does not technically put more money in low-income pockets, it allows them to keep more of what they earn. A progressive tax system may tax, for example, high-income earners at 30 percent and low-income earners at 15 percent. Progressive taxation is supported by citizens and economic analysts alike, arguing that it increases financial opportunity for middle- and low-income citizens while still giving the government revenue. Progressive taxation works for a social good and reduces the chance for wealth being concentrated in the hands of the already wealthy, thus preventing social stratification that can harm a country.
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Support from the federal government is linked to tax revenue, as it is critical to funding government programs such as social welfare and public goods. The federal government can and should continue to create and enact policies that lessen the burden on low-income citizens, like President Ronald Reagan’s Earned Income Tax Scheme, which has also been supported by other presidents, including Barack Obama who called income inequality “the defining challenge of our time” (Hubbard, 2014). The government should work towards the equal distribution of both wealth and equality for American citizens. It is not a matter of treating poor and wealthy citizens differently because of income, but understanding that those significant differences in income can create financial freedom or financial strife.
Finally, solving income inequality cannot happen without tax reform. Research shows that the top 1 percent’s income has skyrocketed nearly 300 percent over the past 30 years, while middle- and low-income growth has plateaued (Berman, 2013). Slashing taxes primarily for the rich does nothing to take away from income inequality. More income equality bridges the gap between the rich and the poor and according to the International Monetary Fund in 2011, can bring about long-term economic growth. As the United States faces stagnant wages, the rich have benefitted from the country’s economic gains more than the poor. Greater levels of income equality corresponded to more long-term economic growth, including lower debt levels. When benefits are shared amongst all and not restricted on the premise of “hard work” meaning more income and opportunity, it is only then that economic reform can last.
In conclusion, the increasing income inequality in America is a cause for concern for citizens and myself. As a candidate for state, it is my stance and belief that a progressive tax system will redistribute wealth from the rich to the poor in society, and will definitely reap the desired effects of lower income inequality. I hope is a solution that Congress will seek to adopt in the near future, and I look forward to working with them.
- Berman, J. (2013, June 17). Income Inequality Greatly Exacerbated By U.S. Tax System: Study. Retrieved September 06, 2017, from http://www.huffingtonpost.com/2013/06/17/income-inequality-tax-system_n_3454216.html
- Hubbard, G. (2014, January 10). Tax reform is the best way to tackle income inequality. Retrieved September 06, 2017, from https://www.washingtonpost.com/opinions/tax-reform-is-the-best-way-to-tackle-income-inequality
- Theme 3: Fairness in Taxes – Lesson 3: Progressive Taxes. (n.d.). Retrieved September 06, 2017, from https://apps.irs.gov/app/understandingTaxes/student/whys_thm03_les03.jsp#quickCheck
