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.