Would Taxing the Rich Fix the Deficit?

In 2009, the government’s budget deficit was $1.5 trillion. Many have suggested raising taxes on the richest Americans to help offset the budget shortfall. Economics professor Antony Davies uses data to assess whether taxing the rich could possibly make up the difference.

First, Professor Davies shows that the richest 5 percent of Americans already pay a tax rate almost three times higher than the average tax rate of the remaining 95 percent. It’s hard to argue that the richest aren’t paying a fair share of taxes. Aside from that, for the richest Americans to shoulder the deficit, we would have to raise their effective tax rate to 88 percent. At 88 percent, a family earning $300,000 each year has only $36,000 after taxes—less than the average American earns.

Professor Davies shows other scenarios that would be necessary to pay the $1.5 trillion difference between government revenue and government spending. Realistically, taxing the rich is not going to be able to solve this problem. “The budget deficit is so large that there simply aren’t enough rich people to tax to raise enough to balance the budget,” Professor Davies says. It is time to start working on legitimate solutions, like cutting spending.

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7 Comments

  1. Matt Wavle

    How exactly do you "tax the rich"?  When they feel the pinch they have the resources to make adjustments.  They won’t take 1 less trip or cruise, instead they will just not give solid raises.  In other words, you cannot squeeze "the rich" (a term of comparison) without hurting everyone else below them.

  2. Heather Riggio

    I agree with Matt. They will just hire 10 less people, take less risk, meaning open less businesses, tip less, hire more qualified workers for less, sponsor less scholorships. Besides, it is your choice. Immigrants come to this country with nothing and find a way. we should look for more ways to import less, export more, create more jobs, and take control of our own destiny. I know people who were on unemployment for a year, for no reason. I told them, hey why dont you try auction hunthing, or credit card processing sales, or even just attend a FREE seminar on motivation…nope, I will wait for my unemployment to go.. then they get seperate, take that crappy job and blame the world a year later. I feel anyone that is rich wants to be and anyone who wants to be the victim wants to be. want lower taxes? fire the monkeys running the zoo!!! VOTE on reality not a “party”. Political lines are becoming almost cultish.

  3. Jeff Hill

    More like they write the rules, Throughout history the King of any civilization was always the usually the largest landowner, this helped provided easy access to tangible assets. This type of portfolio is biased towards inflation. Rising costs were always easily passed on in the form of higher rents, which were paid as by a taxation on ones production. A bushel of wheat for example. Since these goods were then sold for coin, devaluation the amount of specie in coin would boost nominal GDP. While we have moved towards a nation state the legacy remains. As time goes this political class keeps adding tax laws for all kinds of various reasons, this is hid by just how difficult to understand the tax code it is. at 72,000 pages its a pretty safe bet to say the average masses are at a disadvantage. Tax the rich debates always steer towards a tax on incomes, in short tax the rich means tax rich peasants, Not the upper classes whose net worth is helped by inflation. The merchant class is stuck in between.

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