The Instigator
BobTurner
Con (against)
Losing
0 Points
The Contender
Benshapiro
Pro (for)
Winning
4 Points

Tax Rates

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Post Voting Period
The voting period for this debate has ended.
after 1 vote the winner is...
Benshapiro
Voting Style: Open Point System: 7 Point
Started: 3/11/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 556 times Debate No: 48914
Debate Rounds (5)
Comments (3)
Votes (1)

 

BobTurner

Con

Pro will argue that tax rates on the top 1% should be increased. Con will argue that they should not be. Burden of proof is shared.
Benshapiro

Pro

I accept.
Debate Round No. 1
BobTurner

Con

Higher tax rates on the wealthy will reduce economic growth. The literature on taxing the rich and economic growth is quite weak. There are studies purporting to look at this question, but they are often little more than looking at a historical correlation between tax rates and growth, which is simply not a very sound research method as it ignores other factors that have larger impacts on growth among other reasons.

First, we have evidence that higher tax rates in general have a negative impact on growth. An overview of this literature is available the sources. The Tax Foundation chronicles these sources [1].

We also have evidence that higher tax rates are responsible for the relative decline in hours worked in Europe relative to the USA, which has contributed to Europe being less productive [2].

Second, we have the evidence that more progressive tax rates harm economic growth. An example of some of this evidence is in the sources [3].

Finally, we have the evidence on how the behavior of rich people changes when taxes are changed. The evidence suggests that the behavioral responses are significant [4].

Taken as a whole, the evidence suggests that higher tax rates reduce economic growth in general, more progressive tax rates reduce economic growth, and rich individuals have quite large behavioral responses to changes in taxation. This is important as the main channels through which high tax rates harm economic growth are on the supply side rather than the demand side.

Entrepreneurship is one of the central drivers of economic growth [5]. After all, entrepreneurs are necessary to continually innovate in a constantly changing economy. Unfortunately, highly progressive taxation decreases entrepreneurship. This is simple to imagine if one looks at two men who both have a job that pays $200,000 and a potentially good idea. Both men pay 20% tax rates on their $200,000 income and, if they are to pursue their idea, they would be forced to give up their job. The difference is that one man lives in a country with a flat tax regime of 20%. The other man lives in a supposedly "fairer" society where the first $200,000 are taxed at 20% but every dollar after that is taxed at a punitive 80%. This would dramatically lower the chances that this man would become an entrepreneur. This is a rather extreme example, but the logic applies to any progressive tax regime to varying degrees. Not surprisingly, there is strong evidence that progressive taxation has a negative effect on entrepreneurship [6].

High tax rates discourage productive behavior such as investing, working, and taking risks and encourages unproductive behavior such as tax avoidance. The evidence provided in the sources suggests that this effect is quite powerful and makes a meaningful difference in the economy. It's also important to note that wealthy individuals are more able to change the composition of their income so they can more easily avoid taxes, which is why they have such high elasticities of taxable income [4].

There is a widespread belief that taxes on the richest 1% are low. This is simply not the case. It seems that this perception is based entirely on anecdotal evidence. There is no doubt that some rich people pay low tax rates, but, as a whole, the richest 1% pay quite high taxes.

The CBO estimates that, in 2013, the top 1% paid an average federal tax rate of 33.6%, compared to 18.1% average for all quintiles [7]. This does not include state and local taxes which, according to reasonable estimates, add another 6% or so to the average tax bill of the top 1% [8]. In total, this suggests a tax rate of around 40% on average, with some higher and some lower.

I find it very hard to argue that one's "fair share" is more than 40%. Admittedly, this is a bit subjective because everyone has a different belief system about what is fair, but I think the fact that wealthy individuals already pay almost 35% of their income to the federal government and 40% to all governments would come off to most reasonable people as, if anything, too high, especially when realizes that the wealthy are already paying a higher tax rate than other classes.

The practical problems with raising taxes on the rich have already been discussed, at length here. I also believe there is a moral element to this debate. Do we really want to live in a society where nearly half (or over half) of somebody's income is confiscated by the government?

I certainly don't. America was founded as a free nation, with free enterprise at its core. One of the key tenets of free enterprise is that the government sets no limit on wealth. It is understood that taxes are necessary to pay for basic services and such, but I think it is hard to say that people paying 40% of their income in taxes are not paying their "fair share". No, raising taxes on the wealthy, at this point, would bring us to a place with tax rates that are better described as "confiscatory" than "fair".

Confiscatory tax rates on any class or group is totally contrary to the moral core of the USA. Raising taxes further on the wealthy would be a moral and practical mistake.

1. http://taxfoundation.org...
2. http://www.economics21.org...
3. http://business.pages.tcnj.edu...
4. http://www.economics21.org...
5. http://www.nber.org...
6. http://www2.gsb.columbia.edu...
7. http://www.cbo.gov...
8. http://www.itep.org...
Benshapiro

Pro

First, I will readily admit that raising taxes on the top 1% will reduce economic growth. Economic growth is not always a good thing, especially when there is a rising gap of inequality.

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Alarmingly, the gap between the rich and poor is surging.

GDP is not a very good measure of a country's well-being but GDP is often used as a measure to indicate how the well-being or "happiness" of a country.

What I'm getting at here is that the rate of economic growth should not be the primary concern of an economy. The primary concern of an economy should be to serve the needs of the majority of the people. A nations economy must serve people, not the other way around.

3 reasons why taxes should be increased on the top 1%.

1) letting the rich get richer decreases mobility. Mobility simply means movement between socioeconomic status. America should be the land of opportunity and this rising inequality is squandering it.

2) real-estate prices become inflated. There's only a limited amount of land but those who are getting immensely rich buy it up. In the process, real estate prices rise for everyone else.

3) countries with lower inequality tend to be the happiest.

"Released Monday, the 2013 World Happiness Report ranks the happiest countries around the globe, with Denmark, Norway and Switzerland leading the pack." - huffingtonpost

Denmark, Switzerland, and Norway all have a significantly lower Gini Coefficient (measure of income inequality) than the U.S.

Also, there is a diminishing marginal utility per dollar earned as income rises. It would be incorrect to assume that $1 to a rich person gives him the same amount of happiness that same dollar could bring a homeless person.

The tax on the top 1% of rich people should rise enough to stop the income gap from widening.

" . . . the headline figure has everybody outraged: 95% of income gains since 2009 have accrued to the top 1%."
http://www.businessinsider.com...
Debate Round No. 2
BobTurner

Con

Rebuttal

Alarmingly, the gap between the rich and poor is surging.


Where did you find that chart? Can you please cite it? Also, how can you attach this growing inequality to tax rates? Correlation does not equal causation.


What I'm getting at here is that the rate of economic growth should not be the primary concern of an economy. The primary concern of an economy should be to serve the needs of the majority of the people. A nations economy must serve people, not the other way around.

But increasing economic growth is good for everyone, is it not? If you raise taxes, businesses are less productive and lay people off, so their minimum wage is $0. Someone cannot possbiyl be happy without a job, can they? Also, when businesses are productive they provide good products to use, such as iPhones, at lower prics. Otherwise they raise their prices to cover the taxes.

letting the rich get richer decreases mobility. Mobility simply means movement between socioeconomic status. America should be the land of opportunity and this rising inequality is squandering it.

Where is your evidence for this? This is only anecdotal.

real-estate prices become inflated. There's only a limited amount of land but those who are getting immensely rich buy it up. In the process, real estate prices rise for everyone else.


Inflation of real-estate prices? I've never heard this before. Evidence?

countries with lower inequality tend to be the happiest.

"Released Monday, the 2013 World Happiness Report ranks the happiest countries around the globe, with Denmark, Norway and Switzerland leading the pack." - huffingtonpost

Denmark, Switzerland, and Norway all have a significantly lower Gini Coefficient (measure of income inequality) than the U.S.


Evidence? You didn't cite a sourc.e Also, prove to me that raising taxes will decrease income inequality. I think it will make everything worse because rich people will lay off poor people. Have a poor person ever given you a job? I don't think so.


Also, there is a diminishing marginal utility per dollar earned as income rises. It would be incorrect to assume that $1 to a rich person gives him the same amount of happiness that same dollar could bring a homeless person.

Proof? Rich people use the money to invest not consume, so this thesis is fundamentally wrong.

The tax on the top 1% of rich people should rise enough to stop the income gap from widening.

How much more would you like it to rise? They're already paying about 40% of their income. What's enough?

. . . the headline figure has everybody outraged: 95% of income gains since 2009 have accrued to the top 1%."
http://www.businessinsider.com......


That's because of the Federal Reserve pumping money into the system so this is financial wealth. You cannot link that to tax cuts.



I'd also like to point out that all of my arguments have been dropped at this point.
Benshapiro

Pro

Con's opening arguments have plagiarized verbatim from BigDave80 in this debate

http://www.debate.org...
Debate Round No. 3
BobTurner

Con

All arguments have been dropped.
Benshapiro

Pro

yes you shouldn't copy/paste people's work as your own.
Debate Round No. 4
BobTurner

Con

I accept your concession.
Benshapiro

Pro

Don't support plagiarism, vote pro!
Debate Round No. 5
3 comments have been posted on this debate. Showing 1 through 3 records.
Posted by wrichcirw 2 years ago
wrichcirw
This is the second debate CON is hosting where he blatantly plagiarizes someone else's opening:

http://www.debate.org...
Posted by BobTurner 2 years ago
BobTurner
haha, I love this subject!
Posted by Hematite12 2 years ago
Hematite12
Lol you're in an identical debate with me
1 votes has been placed for this debate.
Vote Placed by Dakota-Hiltzman 2 years ago
Dakota-Hiltzman
BobTurnerBenshapiroTied
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Total points awarded:04 
Reasons for voting decision: Plagiarism isn't cool.