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WA2_econ blog - Microeconomics Writing Assignment II The...

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Microeconomics Writing Assignment II The Costs of Tax Fairness President Obama’s recent proposal to raise tax rate on the wealthiest Americans created public controversy. Advocates believe raising tax on individuals making over $1 million annually will reduce the U.S. income inequality. However, carefully examining the nature of income tax and the trade-offs between tax equity and efficiency reveals that increasing taxes on the rich is ineffective in reducing the income gap. To begin with, taxing the rich encourages this group to report less taxable income, limiting revenue inflow. Apparently, workers earning high wages have access to accountants who figure out how to reduce taxable income. Furthermore, the rich have many options for putting their money beyond the reach of the tax collectors. In addition to being able to put their money into tax-exempt securities, the rich can easily transfer their money to foreign countries, with the ease of electronic transfers in a globalized economy. In other words, the
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