Most people have never met anyone who enjoys paying taxes, and a great many individuals strongly dislike them. Granted, it is important for there to be some degree of taxes, as they provide a good source of income for our government. In the United States, we live in a symbiotic relationship with the government, supplying it money while it uses that money to provide us with safety, infrastructure, and rights. Since, as Abraham Lincoln stated, our government is “of the people, by the people, for the people,” it is important for us to get as much out of this relationship as possible. The less taxes we have to pay, the better. The two largest types of tax collected are income tax and corporate tax. Tax cuts can come in multiple forms, and a combined reduction in the corporate tax rate and income taxes would be the best option, as it would give civilians and businesses more freedom to use their resources as they see fit.
Currently, the federal corporate tax rate is 35 percent. This means that over one-third of the money businesses make goes straight to Washington D.C. As the graph below shows, out of every industrial country, the United States has the highest corporate tax rate. And a couple of those other countries shown are in a far worse economic condition than the U.S.
Critics of this argument might point out that the United States has the largest overall debt of any country in the world. But that alone does not tell the whole story. A country’s debt to GDP ratio is more important than overall debt itself, and provides more useful information about the shape of a nation’s economy. In 2010, the United States was ranked third, with Japan and Italy as first and second among the major economies. A number of other countries with less powerful economies including Greece, Iceland, and Jamaica also have higher debt to GDP ratios than the U.S. Decreasing our corporate tax rate would boost the economy and increase GDP, which of course would help improve our debt to GDP ratio. Another benefit would be an increase of investment by businesses, which would be very beneficial to the economy. Businesses could use the extra money to hire more workers, buy more capital, or build new locations.
Unlike the corporate tax rate, the federal income tax rate varies depending on salary. As of 2016, for Americans in the top income tax bracket, it is 39.6 percent, while the poorest Americans only have to pay 10 percent in taxes. There is also a 15 and 25 percent bracket, among others. It is sensible for the poorest people to pay less, as they cannot afford to give much in taxes. But the richest are paying way more than their fair share. In fact, the wealthiest 1 percent of Americans paid 46 percent of all income taxes in 2014. This is a stark comparison to the graph below which shows that almost half of all Americans paid no federal income tax in 2015. The immediate argument for high taxes on the rich is of course “they are rich, so they can
afford it.” However, they earned their money and should be able to keep more than 60 percent of it. Just because they are wealthy does not mean they should have to pay this much. Another issue often brought up is that the wealthiest Americans shirk their income taxes by taking advantage of loopholes and storing wealth in offshore accounts. But they may be less likely to do this if their income taxes are lowered. One possibility would be to keep the 10 and 15 percent income tax brackets the same, and have everyone else pay 25 percent. This seems like a sensible amount; high enough that wealthy individuals are contributing a large sum of money, but not unreasonable. Even with that, the government would be raking in a substantial amount of money from its citizens.
We also must consider the fact that our government loves to spend money. Regardless of how high the country’s tax rates are, the government would want to spend all of it and then some. Perhaps decreasing the corporate and income tax rates will influence our government to be thriftier.