Taxation (Essay Sample)

Taxation
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Taxation
Taxation is perpetually becoming a critical subject in public finance, with different groups arguing on what systems the government should adopt. Liberals and conservatives have for a long time been at loggerheads, trying to prove the efficiency of their proposed tax systems. Although reaching a common level of compromise has not been easy, liberals seem to be gathering significant support. Christopher, Spencer, & Thomas, (2014) argue that the current world needs a liberal government, which can spend more time creating opportunities for its citizens. This article backs the liberal school of thought by critically analysing the efficiency of this system against the flaws of conservatism. It will conduct a comparison of the two ideologies, and draw strong support from different principles and canons of public finance and economics.
As explained by Stefan, Markus, & Erik, (2015) liberals are in full support of a progressive tax system, where people pay tax according to the level of their income. In that view, those who earn more will be taxed higher rates than low-income earners. According to Christopher, Spencer, & Thomas, (2014) a progressive tax system allows the government to reduce the gap between the poor and wealthy. A nation that has a huge poverty gap is likely to experience a slow growth rate since resources are only controlled by a few people. Kornhauser, (2014) argue that distributing resources to the majority helps create more opportunities in a country, which later contributes to its economic growth. Liberals insist that the government should be motivated by the interest of the public. On the other hand, conservatives assert that there should be minimal government intervention in the economy. They believe that the major role of the government should be to create a free environment that can allow individuals to pursue their own goals. According to comments from Michelmore, (2012) conservatives believe in personal empowerment, rather than the public interest. They argue that it is impossible to please the attention of the general public and that the government should only create a free environment. They hence argue that the government should try to adopt a less progressive tax system. They promote tax cuts and tax exemptions of individuals within certain tax brackets.
Equality, as discussed by Stefan, Markus, & Erik (2015) is a primary canon of an efficient taxation system. This does not mean that people should pay the same level of tax, but rather, taxation should be aimed at creating equality in the country. What this simply means is that the poor should be taxed less while the rich should pay higher taxes. Kornhauser (2014) is opposed to the idea of a progressive tax; he claims that it is a disincentive to the affluent. Wealthy individuals will be demoralised to work hard if the government takes most of their profits as tax revenue. As Rixen, (2014) explains, when the rich pay higher taxes, they will be encouraged to work hard so that they can increase their aggregate income. This is the income effect explained in economics. On the other hand, the poor will have more disposable income, and this will raise their living standards. A progressive tax system gives more to go to those with higher needs as compared to individuals who are at the top of Maslow’s hierarchy of needs. The rich already have enough to take care of their basic needs, and most of their money goes towards self-actualization, as explained in the Maslow’s pyramid (Michelmore, 2012).
It is wrong to tax the poor highly, and give tax cuts to the rich since that will not eliminate poverty, and increase the gross domestic product (GDP). Instead, it will result in a situation where low-income earners grow poorer, and the rich become wealthier. In the end, the government will not achieve its initial goal but will create a poverty trap (Kornhauser, 2014). It is incontestable that the national government will collect greater revenues by imposing more taxes on the wealthy. Such funds will be used to provide public and social amenities like good education and affordable health care to low-income earners, hence achieving the purpose of efficient taxation. It is always important to remember that any system that does not improve the lives of the general public cannot be effective and sustainable. Michelmore (2012) explains that nations with a small number of successful people are usually at a high risk of ...