Economist GMAT Reading Comprehension Challenge #15

Economist GMAT Reading Comprehension Challenge #15

Welcome to today's GMAT article! If you're new to the challenges start at the Economist GMAT Reading Comprehension Challenge home page for instructions. Good luck!

Article: How to Tax the Rich

Link: https://www.economist.com/leaders/2019/02/02/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.

Main Idea:

Taxing the rich is one part of necessary revenue raising but can only be a piece of the equation.

Primary Purpose:

To discuss potential plans for raising tax revenue in the USA.

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