As a measure of the tax reform of age of the U.S. President Mr. Barack Obama recently unveiled a double taxation. The aim was to ensure that the rich are taxed more heavily than those less fortunate. While most people seem to support this move one wonder if such a tax reform will reduce the deficit and put the public finances.
As the marginal utility of money is rich in low taxes higher taxes to meet the government's cabinet without much resistance. It is interesting to note that even the treasure reluctant countries like the U.S., most people have a higher rate when the guarantee is given rich. But you also need to understand here is the speed of the effect of lower taxation. As corporate profits and investment in the primary source of income for the rich, higher taxes would mean that capital, which will effectively serve the future growth of government sitting idle cabinet. It interferes with capex cycle and effects, which should return the plow-back.
Second, the proponents of high tax the rich and the need to take into account that tax the rich to the overall tax burden, the government kitty. The first look at the statistics shows that the market share is significant. In fact, it has risen as much as the developed world is concerned. So to the extent that it helps the government to better manage your finances, while in the Western world is steeped in debt.
But because governments have yet to meet its fiscal targets they need to evaluate the usefulness of additional taxes on the rich vis-à-vis a sympathetic business environment (tax nominal value). Friendly business environment will contribute to the initial capital investment and future growth. This not only generates income from the government (through taxes, but at a slower pace), but also leads the way for growth. Take the example of the 1970th This was the era of higher marginal regular feature in many developed economies. However, growth will slow significantly lowered the tax. This will encourage private investment and created a vibrant environment for growth.
In addition, one must also take into account the mobility associated with the rich. Rising prices may cause the rich to move or move to a tax haven countries. Migration risk is usually greater among firms. If a company out of its manufacturing base from the useful to the zone at home would not only lose tax revenues, but also suffer from growth in GDP front.Thus, while tax rates without increasing the offer temporary relief as much as an internal deficit targets are concerned, this is not a universal remedy to address the budgetary problems facing the Western world.
