Keoni Buenavista
Date: 05/11/2022
Prompt: Is a higher form of taxation in the United States better or worse for the country? What effects will raise federal taxes to have on the economy? What can additional taxpayer money help to fund?
Taxation in the United States at a federal level affects sources of income from all individuals and businesses within the country. This form of tax is imposed on property, sales, income, dividends, estates, imports, and gifts. As of 2020, the U.S government in addition to its state and local governments’ total tax collection only represented about 25.5 percent of the nation’s GDP, showing below the 33.5 percent average of the OECD GDP. Even with the total tax collection amount being a lower percentage of the nation’s GDP compared to the OECD GDP, many still struggle with the amount of taxes. Given the fact that prices across all types of sectors in the economy are rising, such as in the restaurant industry, agriculture, and materials, increasing federal taxation would not be the best course of action.
One of the first outcomes that I see from increasing the federal tax rate is less spending or an overall lower GDP. If individuals (taxpaying) are given a higher taxation rate, they will have less to spend and therefore slowing businesses down and resulting in a slower economy. Also, private spending allows small businesses to better thrive, and with less private spending happening, some small businesses may have to close, resulting in less diverse markets, on a local, state, and national level.
From the decrease in private spending, the job market will also be affected. As more businesses (large and small) have higher taxes levied on them, it cuts the amount that they have to spend on employees, which also has an increased cost of labor, meaning there will be fewer jobs for unskilled and skilled labor. Additionally, this leads employers to increase costs on consumers, leading to even less private spending. The money that goes to the government from taxes would and could be used to help those in economically struggling demographics, but this is done less efficiently compared to allowing the general population to spend money to help benefit themselves and local businesses.
Generally, much of the money collected from taxpayers in the United States goes towards public schools, funding the military along with their operations, public services like the fire departments and police departments, paying the salary of government officials, and other forms of government spending. Generally, these things are quite beneficial for the general public in the U.S., but there needs to be a balance between the amount the government has to spend and the amount that private citizens and businesses have to spend. With not enough taxes to put towards government spending, public services and other governmental agencies will not have sufficient funding to operate. A similar effect happens when there is too much taxation to put towards government spending.
Overall in my belief, increasing federal taxes across the board is not very beneficial for society within the United States, especially with the rise of small businesses and entrepreneurship. Private spending should be more emphasized rather than government spending, as there are more economic benefits from doing so.