There is news that US President, Barack Obama would be proposing what is being called as "Buffett Tax" on people earning more than $1 million a year as part of his deficit-cutting recommendations to the US Congress.
The purpose for such a tax is to bring the tax rates of the wealthy Americans in line with that being paid by the middle class Americans. Warren Buffett had once famously said that he thinks that he, and other super-wealthy Americans, don't pay enough in taxes. He said his tax rate is 17.4% whereas most middle class Americans pay 30% or more in income tax. It’s really an irony that cannot be explained by simple economics!
No wonder Capitalist America took it so long to realize as to who needs to be taxed more and who less. Taxing the rich and leaving a little more extra cash in the hands of the middle class could definitely change the dynamics of local consumption significantly. It’s vanilla economics, that the marginal utility of a few thousand dollars in the hands of a middle class is much more than that in the hand of billionaire!
In his weekly radio address Obama said that Americans need to be ready to "pay their fair share" to narrow the U.S. deficit, previewing his proposals to Congress. Obama has repeatedly argued for the wealthiest Americans to face higher taxes with fewer loopholes and exceptions as part of the effort to ensure the U.S. debt-load remains in control. In addition to floating the idea of more taxes on the rich, he is also expected to propose companies getting some tax breaks.
It’s no wonder that the Republicans, who have raised the volume on Washington's fiscal problems as the November 2012 presidential election nears, see higher taxes on the wealthy as a problem for jobs, given that entrepreneurs and companies would be strongly affected. It’s really an unfair world where the rich would go to any length to arm-twist the government in preserving their wealth whereas the middle class has difficulty in even building a cushion for tough times.
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