07. Is it fair to tax the rich higher than the poor and middle class?
What is your Opinion : Yes or No?
Why is it so? = Pick Pointers for your arguments
| Yes | No |
|---|---|
| Nothing new. Tax has always been a system - referred even in Manusmriti and Arthashastra. It’s an income source for govt. - be it monarchy, dictatorship or democracy. | Subsidy culture already e.g. electricity, gas, oil, fertilizer subsidies. Schemes for underprivileged. Major govt expense on schemes yet services are not up to the mark. How long will we keep disincentivising productive people who have hard earned their money and property?. |
| Kalidasa’s Raghuvansham : As Sun takes water and returns lot of things, similarly government takes tax and returns a lot to people. Rich enjoy fruits of labour from other classes and also, derive most benefit out of infrastructure. Billionaires in the US pay a smaller tax rate than most teachers and retail workers. Thanks to a tax code that favors income from wealth over income from work—and a slew of tax-avoidance strategies—the richest among us end up paying a smaller percentage of their income to the federal government than most working families. | Productive people and states are being overburdened. Only 1.7 Crore people in India pay direct taxes. 60% of tax collection comes from 3 states - Delhi, Maharashtra & Karnataka.
3 Indians pay >INR 100 Cr tax. 85% taxpayers pay
|
| Progressive Taxation (Direct Taxes) => Earn more = More Tax => Considered best tax norm across world e.g. Income Tax, Corporate Tax, Capital Gain Tax, Wealth Tax etc. In India, they form 51.5% of tax revenue. These taxes should be rationalized to increase compliance. Indirect taxes are regressive where rich or poor are taxed same e.g. GST, ED, Customs Duty. In India, they form 48.5% of tax revenue. Thus, already poor and middle class are sharing heavy indirect tax burden compared to rich. For every rupee that government earns, GST contributes 17 paisa while income tax contributes 15 paisa. Regressive taxes e.g. GST rates should be rationalized e.g. shirt buttons need not be taxed at 18% as they are used by poor also. This will help reduce tax leakage and all can pay the taxes too. Such taxes hit the poor hardest - they pay highest portion of their incomes This will help increase Tax to GDP ratio which is required to move towards being a developed economy. | Evidence shows income tax including corporate tax discourages people from working. Countries with lower income tax e.g. UK tends to have more economic growth. |
| In India, highest tax bracket is 25% while in USA it is 37%, Japan it is 47% and Ivory Coast is 60%. People in developed countries like USA, Japan happily pay those taxes as social security benefits are there while health and education services are virtually free. While in India, people complaint of lack of such services and hence, are against higher taxation. | Technology should be used to trace tax leakage and resolve it. Government should bring maximum people in tax regime so agriculture income should also be taxed whether it is minimal only. These will suffice and hence, no need to tax the rich more. . |
| Govt spends on defence, infra and govt salaries. Theseare essential to run the nation and we as responsible citizens need to pay taxes to keep the system running. One with higher paying capacity expect better services and naturally should contribute more. | Most burden of direct taxes falls on salaried class -exploited class = TDS, many exemptions not applicable. In 2018-19, salaried class paid 3x tax of non salaried taxpayer. In private sector, there is no pension/employment guarantee/post-retirement benefits but they pay timely tax which comes across as forced charity. Why to tax them more?. |
| There is disproportionate burden on salaried class. Big farmers are tax exempt. In 2016, 8 lakh farmers with annual income above INR 1 Cr did not pay any tax. While those who earn less pay heavy tax, self employed crorepatis pay much less tax. They need to be taxed. | Though majority of direct taxpayers are salaried but there situation has not improved because only 7% of taxpayers vote. In Norway, the no. is 100%, 95% in Canada and 70% in USA. While on vote bank classes, government does not impose taxes easily. |
| MPs enjoy many tax-free perks and also determine their own taxation through legislature. Wealth tax is a good idea as it taxes things that rich have such as property & investments. Some economist advocate land value tax which can generate a lot of money. Good government services need money. Such taxes are unpopular but sooner or later govt.’s will have to bite the bullet. Pressure on public services has increased as population is growing and ageing => Working people have to pay more taxes to support them. As healthcare technologies improve, cost of healthcare will also rise. | Tax compliance among individual taxpayers is 11.6%. Confusion in the system, red tapism, high slabs and presence of informal economy lead to tax evasion. |
| Taxing the rich would pay incredible dividends in ending poverty and injustice. It will also help finance climate change mitigation and adaptation. | Higher taxation on sin goods is an alternative rather than taxing the rich more. |
Some Additional Data Points You should know for opinion building :
DPSPs talk of redistribution of wealth. DPSP Article 38 : Promote the welfare of the people by securing a social order through justice—social, economic and political—and to minimize inequalities in income, status, facilities and opportunities DPSP Article 39 : Equitable distribution of material resources of the community for the common good The study, from the Institute on Taxation and Economic Policy, found that “virtually every state’s tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families.” It added that state and local tax systems are “indirectly contributing to growing income inequality by taxing low- and middle-income households at significantly higher rates than wealthy taxpayers.” In other words, it said the tax systems are “upside down,” with the poor paying more and the rich paying less. Overall, the poorest 20 percent of Americans paid an average of 10.9 percent of their income in state and local taxes and the middle 20 percent of Americans paid 9.4 percent. The top 1 percent, meanwhile, pay only 5.4 percent of their income to state and local taxes.
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Balanced Conclusion / Way Forward :
“We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can’t have both.” -Former U.S. Supreme Court Justice Louis Brandeis
Progressive taxation is the norm and should be implemented as far as possible. With welfare of people at the centre of democracy, wealth tax also makes sense. For taxation to be sustainable and fair to all citizens it should be proportionate to each person's income. Across all nations of the world, the rich have access to more government business and socio-economic opportunities compared to the poor and hence, should contribute more.
However, tax payment should neither feel like charity nor punishment. If we have earned something from society, its our responsibility to give back as tax. Education, awareness and transparency will give a boost to responsible tax behaviour.
Tax compliance needs to be improved which needs simplification of taxes. Also, tax rates should be made such that they don’t seem burdensome. Govt should make revenue receipts and expenditure public i.e. how is tax revenue used. Tax collection should be made efficient. Transparency and attaching honour to higher tax payment will make people willing to pay more taxes.
“I find this debate intriguing and multi-faceted. On one hand, proponents argue that taxing the rich at higher rates is a means of redistributing wealth and addressing economic inequality. They argue that those who have more should contribute more to support public services and social programs. On the other hand, opponents argue that higher taxes on the rich could stifle economic growth and discourage investment, potentially harming overall prosperity.
It’s crucial to strike a balance between addressing economic disparities and maintaining a conducive environment for wealth creation. Perhaps a progressive tax system that considers both income and wealth could offer a compromise. Additionally, exploring alternative approaches such as closing loopholes or implementing more effective social programs might be worth considering.
Very well summarized. Any counters or improvements?