The American dream has aroused passions and led to big migrations to California. In the U.S., anything is possible. If you work hard, persevere and show intellect, you might rise to the top of the social ladder and perhaps follow in the footsteps of Donald Trump or even become the next president.
California recently approved a tax increase for individual residents earning $250,000 or more, and couples accumulating more than $500,000. It’s almost as if wealthy people are being punished for having worked as mules to achieve a high standard of life, rather than being able to enjoy the fruits of their labor.
Imagine you´re a farmer with no money to acquire the crops and land you need. You have to work hard in order to save up and buy them with no help whatsoever. It’s only fair that you shouldn’t be penalized for having a better harvest than your neighbors.
The social safety net in the U.S. is not as strong as some in European countries, such as France. Americans might agree with the expression “you reap what you sow.” The harder you work, the more skill you show, the further you will go in life. The American economic system encourages entrepreneurship and innovation because you earn your place in society by your own merits and distinguish yourself from the rest of the herd.
It’s almost impossible for anyone to determine the fairness of taxes and to what extent they should be applied to different individuals. Some people are born rich, without having earned a cent through hard work. Somebody earned it for them. You might say it is fair to tax them extra because they did not contribute to their own high income.
Consider a person receiving merit-based scholarships. Without the scholarships, they wouldn’t be able to get a loan to go to college. We can agree this person’s success is partially because of government grants. In that case, it’s only fair the government demands a return of its investment if the student eventually earns a high income.
In California, the current tax rate for individual residents earning more than $1 million or couples earning $2 million is more than 13 percent. Meanwhile, the federal income tax for $400,000 and more is 39.6 percent. In France, the income tax is 45 percent for revenues of more than $204,400. Many European countries have similar percentages. At the end of the day, the U.S. tax burden isn’t that bad.
However, the consequences of high income taxes can be damaging for a country because it can slowly destroy its national savings. In France, citizens earning more than 1 million euros are taxed at 75 percent. French actor Gerard Depardieu handed back his passport last month in order to acquire Russian citizenship because Russian income taxes are fixed at 13 percent regardless of income. Other French socialites moved their capitals to other countries such as Switzerland, the United Kingdom and Andorra, which are keen to receiving these savings. This is an example of how too many taxes can kill the tax. Overtaxing rich people contributes to the deficit of a country because there’s less money left in the local banks. These savings no longer generate income in the country. High-income citizens spend more money, on average, than other citizens, thus maintaining jobs and creating a functional economy, so we can argue taxing them is not completely fair.
What is least fair is how some states, such as Florida, Washington, and Texas, don’t impose income taxes. One might ask if it is really fair to take more money from rich people while others pay nothing.
A better agreement between the government and high-income taxpayers would be for citizens with large saving to lend money to the government and receive a minor interest when the dark clouds clear in the economic horizon. Another possibility could be to force them to spend a certain percentage of their wealth in certain economic sectors that need extra help.
