Economist GMAT Reading Comprehension Challenge #15
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Article: How to Tax the Rich
During his lesser-known run…on the highest income.
- Democrats are looking for ways to tax the rich.
- Trump proposed a tax the rich plan in 1999 although will likely be opposing taxing the rich now.
In one way…higher taxes will be necessary
- Democrats are proposing programs which will cost money.
- Debt to GDP is already expected to double
- Higher taxes needed
If revenues are to rise…new revenues from them.
- The top 1% have seen a sharp rise (disproportionate) in real income in the past 25 years
- This rise could justify raising new revenues from them through higher taxes.
There are better…partially and temporarily.
- There are better ways than proposed by leading Democrats to raise taxes on capital.
- Higher Inheritance taxes.
- Higher property taxes.
- Higher Taxes on high profit corporations. With the exemption that investment spending could be deducted immediately rather than depreciated.
What about income… keep change incremental
- 70% tax is said to be optimal by study but that study was an outlier
- France’s 75% tax disappointed and was scrapped in 2014.
- USA 37% tax is low and can be increased but slow change is best.
Although there is scope… it has limits
- Cortez idea according to one estimate only worth .3% of total tax revenues
- Warren’s proposal worth around 5% (her backers say) but that includes potentially unrealistic assumptions.
- Taxing the rich isn’t a sufficient solution for review raising.
Taxing the rich is one part of necessary revenue raising but can only be a piece of the equation.
To discuss potential plans for raising tax revenue in the USA.