What’s In Your Wallet?
After You Pay Your Taxes, That Is.
In the 2016 election, taxes and tax plans are vital to determine how the American economy will grow for the next four years. Both candidates have outlined their tax plans, but the American people are still uninformed about and daunted by the complexity of the tax code. Clinton wants to reduce taxes on the middle class, while Trump believes that taxes should be lessened across the board. Of course, the real issue is finding out which system will work best in our country. Both plans attempt to ensure that all Americans pay a “fair share,” but the candidates hold contrasting ideas of what that will entail.
Faculty and students at Mamaroneck High School were asked the following question: “How do YOU think taxation should differ between the middle class and the wealthy?” They responded in a variety of ways.
Income inequality in America is currently at its worst since the Great Depression. The annual income of the 400 wealthiest Americans is approximately as much as the bottom 150 million Americans combined. One would assume that those at the top are paying quite a bit more in taxes than those at the bottom, right? Right. This is how it works — until you factor in tax loopholes. The wealthy often find access to their own private tax systems — something Clinton plans to put a stop to. These loopholes, taken advantage of by big businesses, allow the wealthy to avoid paying what they’re supposed to by opening up shop in countries with low tax rates. By evading taxes, they also avoid paying their fair share to boost the quality of life for the majority. Taxes help cover expenses such as education, medical care, and clean energy.
Another one of Clinton’s pitches is to lower taxes on small businesses and middle class families. Although tax cuts often leave people with more spending money, many tend to oversimplify the relationship between tax cuts and economic growth; there are are a lot of effects that are overlooked, such as the growth of revenue. In 2009, Moody’s (economic research firm) found that temporary tax cuts could increase gross domestic product (GDP) greatly, but an overall stronger benefit would come from increased spending on things such as jobs and food stamps. As opposed to chopping tax rates, more money needs to be poured into welfare.
*the following data is according to official IRS data from 2009, as reported by CBO*
The top 1%:
- Paid 22% of taxes
The top 20%:
- Earned ½ the national income
- Paid 70% of federal taxes
The middle 20% (i.e. the middle class):
- Paid 9% of federal taxes (⅔ of their income)
Though the wealthy currently pay more money in taxes, they are paying a smaller percentage of their income than the middle class is. Again, this leaves the middle class in more of a struggle to cover certain expenses. Like Clinton, Trump also looks to fix this; he plan to give childcare cost deductions to mainly working and middle class families, excluding those of a joint income of $500,000 or more. This contrasts with his all-inclusive tax cut plans which, unlike Clinton’s, provides cuts for everyone and increases for no one. One can assume that his plan attempts a fair trade in the sense that the wealthy will be able to continue paying a smaller portion of their income despite certain aid being given to the middle class. This plan is supposed to cater to all income groups, as opposed to focusing on relieving just one group.
With a large history in the world of business, Trump wants to ensure companies and the competition among them continues to grow, providing both large and small businesses with cuts. Whereas Clinton sees that tax cuts for solely small businesses will help stimulate their growth and ability to “catch up” with larger businesses, Trump believes that the ever-so-crucial competition would be diminished by giving this advantage to companies who currently have the lower-hand. He is very determined to protect those at the top from losing too much of their income to taxes; he believes that a “fair share” involves the wealthy paying more money, but not necessarily a larger fraction of their income. He does not want to make the wealthy feel as though they’ve lost the upper hand.
Clinton and Trump each have their own favored income group (the middle class and the wealthy, respectively) that they seek to protect and benefit in their tax plans. As expected, the favoring of one group occurs at the expense of others in each plan. While Clinton plans to cut taxes on the middle class, she will raise them on the wealthy. On the contrary, Trump will cut taxes for both groups, allowing the wealthy to get away with paying a lower percentage of their income (which, again, can interfere with the welfare given to the middle class). Though only time can really tell which plan will better accommodate American taxpayers, success will likely be found in some sort of compromise.
