Should The Rich Pay More Taxes?

I am not trying to get too political here, but during the debt ceiling debate this August President Obama made the following statement:

And I do not want, and I will not accept, a deal in which I am asked to do nothing, in fact, I’m able to keep hundreds of thousands of dollars in additional income that I don’t need, while a parent out there who is struggling to figure out how to send their kid to college suddenly finds that they’ve got a couple thousand dollars less in grants or student loans.

This is the usual class warfare talk that we are so used to hearing from both sides.  I am not a big fan of either political side – I think they are both partially to blame for the financial mess our country is in – but I was really taken aback by President Obama’s comments.  As a moderate income earner, I would not directly feel the impact of taxing those that make more than I since it would not affect my paycheck; however, I do not agree with this philosophy alone to lessen the debt our country owes.  That is great that the President does not need hundreds of dollars in additional income (maybe he could personally donate this additional income to the IRS) but who is to say that someone else that makes a similar salary does not need this money.  Maybe they are using it to send their children to college or saving up to start a business.  Just because the President does not need this money doesn’t mean that someone else feels the same way.

Should the Rich Pay More Taxes?I am all for reworking the tax code to close some loopholes but I feel we need compromise on both sides.  I have heard some say the rich should pay more in taxes because they can afford to.   Have we ever thought that some are rich because they chose to make changes in their lives so they could become rich?  I look at how Tracy and I live our lives.  I know many people that have nicer things then we do because they spend their entire paychecks and do not plan for their futures.  These same people tell me they have no money to invest for their future – they actually do but make the choice to spend it now rather than save.  On the other side, Tracy and I choose to not buy everything we want, drive older cars and cut costs anyway we can so we have money to invest for our retirements.  So, at this point in time, some people have a lot more things than we do and spend money in ways that we do not.

Let’s fast-forward thirty years.  If all goes as planned, Tracy and I should have invested enough so that we will be able to retire as millionaires (if the stock market continues to perform as it has for the past 100 years) whereas some of our friends that spend money now rather than save won’t have anything except Social Security to live off of.  At this point in time, we would be considered the “evil rich” because we have a lot of money saved.  Some would even argue we should pay a larger portion of capital gains taxes.  I think this logic is so wrong.  We have made a choice to save for our Golden Years and have put off buying things so we are prepared for retirement.  It is unfortunate that others did not have the discipline to do the same but I feel it would be a mistake to penalize us for our planning just because others, that had the same opportunity we did, made the choice to do something different.

Do you think the rich should be forced to pay more?

Photo credit: US Army Africa

About Danny Kofke

Danny Kofke is currently a special education teacher and author of “How To Survive (and perhaps thrive) On A Teacher’s Salary.” His frugality has enabled him to pursue a job he is passionate about and, at the same time, support a family of four on his salary alone.

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  • http://www.20sfinances.com 20′s Finances

    You spin this question in an interesting way and has made me think a little. However, I don’t think having a retirement savings of a few million dollars is the upper class. The sad reality is that there are people making 6+ figures a year, while people are struggling to get by on minimum wage or even lower-middle class wages. The wealthy are turning a profit while raising prices for the working class (for example, fuel costs). Even though these are not exact figures, paying 30% of 30K hurts a lot more than paying 30% of 500k, because it is much easier to maintain a standard of living at that level.

  • http://www.moneybeagle.com Money Beagle

    I read a couple of interesting ‘facts’ though they were just in passing, so I don’t have the sources: First is that marginal tax rates, across the board, are at their lowest in decades. While this is true even for the middle class, the ‘spread’ is really big for those making over $1m. Second, in any period where deficit reduction has been a key goal in the past, any successful undertaking involved both spending reductions as well as revenue increases. Trying exclusively with one or the other failed. Every time. So, while I am a pretty conservative guy, there’s nothing to suggest that raising taxes on the rich should be ‘off the table’. My take is that it should be accomplished not by raising tax rates, but by reducing and eliminating many of the deductions that have been enacted over the years.

  • Dick

    You view Obama”s comment as ” the usual class warfare talk that we are so used to hearing. ” I see it as a guy flying first class and acknowledging that he can, and should, pay more than the person in coach. The class warfare starts when the guy in first class wants to fly for free.

  • Bonnie

    Interesting article…however taxes are based on income..not on how much you save. I think people making over $250K per year should not have special tax status and special tax cuts. Even at a higher tax bracket they will be able to save to become ‘millionaires’ in retirement.

  • Bankverse

    I’m firmly grounded in the middle of the road, and I don’t feel that any class in our society should bear any more than other classes. We all got ourselves in the national debt mess, rich and poor alike.

    Personally, I’m not fond of our existing tax code, but worse yet, is the “debate” between the parties. It seems almost impossible to get politics out of something that is so fundamentally important to our nation – how we fund our obligations and debt.

    Balance should be the objective. Fair Tax? Maybe. Fighting over taxation every election is not the answer. Until both sides stop performing for the media, there will be no balance.

  • Bret @ Hope to Prosper

    I am all for everyone paying their fair share of taxes. If that was happening, we wouldn’t have to raise anyone’s rates. Since it’s not, we should get rid of most of the credits and deductions.

    One important fact that gets glossed over is the so called “rich” people making over $250K per year are often small business owners. And, they are the ones creating most of the new jobs. They also pay a lot of taxes, because of the Alternative Minimum Tax and the self-employment tax.

    Big businesses are sitting on their cash, lobbying for special tax credits and not hiring any new employees. They are getting government grants and contracts. They are definitely Not paying their fair share of taxes. In fact, many pay their CEOs more than they pay in income tax. Companies like GE made $5.5B last year in U.S. profits and paid zero.

    We should have an Alternative Minimum Tax for corporations.

  • http://www.accountancyservicesonline.com/ Brett

    I think they should make takes simpler. Maybe everyone should pay 20% tax on everything.

  • not a liberal

    the rich and poor should be paying the same percentage it is stupid to think you should make the rich pay a larger percentage they work hard for their money yes paying say 20% of 50,000 hurts more the 20% on 50,000,000 but thay work to become selfish millionaires they can aford to pay more taxes but should they NO it is unfair and making the rich pay more is the lazy way to get the country out of debt  the reason we are in debt is because the goverment is not good with spending we take a lone to help other countries from other countries when we are in over our own heads  

  • Fair

    I agree with Money Beagle. Remove some of the deductions. In reality though taxes should be fair and equal. Flat tax can work. I like the idea of the “Fair Tax” pretty much makes it even across the board. If you make more money than I do and want to have a huge TV or fly first class you can do it and it will cost a little more. That seems fair to me. You made the money whether by hard work, better decisions, birth, or luck who am I to punish you for it. A Fair Tax would put the federal tax on items using sales tax basically. So basics won’t go up much like food, moderate clothing, essentials. But luxury items will have a higher tax. I’m fine with that. If you have the money go spend it on what you want and if you don’t either wait and save or get the essentials. We cannot be a democracy and want everyone to live the same quality of life. We all have the chance to live it but some people are smarter, luckier, or whatever and make more than us. Why would I tell Bill Gates he should give up his fortune so I can live closer to his lifestyle. He is smarter than me and I congratulate the effort and success that it took to get to be a billionaire. Check out the Fair Tax seems pretty cool to me even though I’ll have to wait a while longer for the bigger TV. I don’t mind it’s Fair.