Should taxes on people making over $250,000 a year be changed?

Should Taxes on People Making Over $250000 A Year Be Changed?
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Should Taxes on People Making Over $250000 A Year Be Changed?
Abstract
The issue of raising taxes has always been a sticky issue for governments the world over. Recently the Obama administration sparked the debate on whether taxes on people making over $250,000 a year should be changed when the president delivered a keynote address at Washington University. Obama expressed his desire not to extend the Bush-era tax incentive for the rich who earn more than $250,000 a year. Following this decision, some experts raised fears that such a move may lead to unfavorable tax regime on those whose income is above $250,000. This proposal, therefore, puts this concern into perspective by first looking at the origin and current state of affairs surrounding the issue. The proposal also delves into the economic problem, the social problem and the political problem of the issue by citing the works of different scholars and experts. The researchers support the changes aimed at increasing taxes on the rich because it is one of the ways of tackling socio-economic and political challenges facing the American society.
Introduction
It is true that fiscal policy changes are always associated with controversy because some may rightly argue that a tax hike is mandatory to reduce the budget deficit whereas others may argue that in a liberal state like the US, the government should allow free interaction of the forces of supply and demand.

Consequently, the decision by the government to get more taxes from the rich is a delicate matter since the economic impact of the rise in taxes is questionable however much the general public may seem to support the move. Equally, it may lead to heightened political temperatures especially from Republicans whose policy supports a liberal economy. However, a change in taxes on people making over $250,000 a year should be enacted because it creates fairness between the rich and the poor and the government only serves as an intermediary.
History and state of the issue
According to Hungerford (2012), increasing taxes on high-income earners is a challenging task in the US because most policies are liberal, which implies minimal interference of authorities in national economic affairs. For this reason, all Republican regimes have always advocated for the liberation of economic policies, low government expenditure, and free open economy. Conversely, the Democratic regimes seem to be inclined to a controlled economy aimed at creating equality between the poor and the rich. The current Obama regime has been termed as a socialist government largely due to its policies such as the Obama care thus implying that an increase in taxes on the rich is in line with the current regime policy.
The economic problem
The key economic obstacle that triggers the need to increase taxes on those earning more than $250,000 a year is the declining economy, thus minimal economic development in the US. According to Goolsbee (1997), the weakening of the economy leads to the pauperization of the people of the US coupled with a decline in the middle-class earners and an increase in low-income earners. Consequently, this results in the slow economic growth witnessed in the country because households are spending less on consumption and trying to save more. The government is then forced to reverse this trend by enhancing trade by increasing the purchasing power of its citizens. By increasing taxes on the rich, the economic burden for low-earners is reduced while at the same time fostering equality in the economy. Scholars also argue that the rich will only incur marginal losses since only the extra dollar above the $250,000 will be taxed at a higher rate. This means changing taxes on those who earn more than $250,000 annually will lead to economic growth.
The Social Problem
As Slemrod & Bakija (2000) correctly argue, economic issues are closely related to social issues, such as the growing social problem of income inequality in the US. For instance, the recent global economic recession widened the gap between the haves and have-nots. The scholars continue to point out that the social inequality is created by the huge difference in income levels among the citizens. Further, they note that such discrepancy leads to tension between the two groups. When such tension exists for long, it may result in a widespread social conflict across the nation and may threaten the stability of the nation especially in the event of clashes between citizens and the authorities. The scholars also note that emerging groups such as the Occupy Wall Street Movement and others are indicators of the social conflict and may grow into large movements if not addressed early.
The Political Problem.
As earlier mentioned, the US has over the years been a liberal economy and the government largely concentrated on other issues such as the national security. A shift in attention from those issues to economic issues such as increasing taxes on the rich will result in a political problem due to over-regulation of the economy (Marr & Highsmith, 2011). According to another researcher, attempts by various previous governments to regulate the economy have always been met with tough criticism by the opposition and the general public. For instance, any fiscal policy that seeks to increase taxes on the low-income earners may lead to mass protests. However, increasing taxes on the rich may be an acceptable move by the general population since it is an indicator that the government wants to create equality following the precedent that was created in the 2008-2009 bailouts (Huang, 2012).
In brief, the decision by the government to raise taxes on those who earn more than $250,000 is welcome because it solves some of the economic, social and political problems facing the nation. High taxes on the rich people is fair because the rich can afford it. However, implementing a tax hike is a challenging task for any government because of resistance from politicians and the affected group. Nevertheless, the government has to find a way of increasing taxes on the rich without creating much animosity because it is the only way to create fairness between high-income earners and low-income earners.

References
Goolsbee, A. (1997). What happens when you tax the rich? Evidence from executive compensation (No. w6333). National bureau of economic research.
Huang, C. C. (2012). Recent Studies Find Raising Taxes on High-Income Households Would Not Harm the Economy: Policy Should Be Included in Balanced Deficit-Reduction Effort. Washington, DC: Center on Budget and Policy Priorities.
Hungerford, T. L. (2012). Taxes and the economy: An economic analysis of the top tax rates since 1945 (Updated).
Marr, C., & Highsmith, B. (2011). Reforming Tax Expenditures Can Reduce Deficits While Making the Tax Code More Efficient and Equitable. Center on Budget and Policy Priorities.
Slemrod, J., & Bakija, J. (2000). Does growing inequality reduce tax progressivity? Should it? (No. w7576). National bureau of economic research.