The Billionaire Economy

Content:

1.    What is Taxation?

2.    Difference between a common man and a Billionaire

3.    How higher and lower taxation effect international and national economy?

4.    Has the present system of taxation failed the common man?

INTRODUCTION

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little

-Franklin D. Roosevelt

In this continuously developing world, many think that problems like poverty and inequality are unerasable and that since the creation of man there has been a hierarchy present in the society. Though this is mostly true but there are certain policies which have been continuously suggested and implemented to at least reduce this inequality, one of these is taking money from the uber rich and giving it to the poor so that the poor are at least able to purchase basic necessities such as food and medical care. To properly understand such a sensitive topic, we first need to confuse our perspective on this topic to create space for thought. According to John Rawls' "veil of ignorance" thought experiment if people are not told about their position in society, their abilities and their wealth they will be forced to create an equal society because they are uncertain of their position and wealth. Now let’s dive into the discussion for the topic Should Billionaires be taxed more? Do people like Musk, Bezos and Warren Buffett owe more to the society? Are they taking their wealth for granted or are we taking their wealth for granted? Though this article may seem long we request our readers to read till the very end to get a definitive answer to the question “Should the Wealthy be Taxed More?”

1.   What is Taxation?

Taxation is a historical practice of governments collecting money from individuals, companies and organisations to fund projects, fight wars and pay salary to government officials. In older times this tax was not directly paid to the government but to nobles and feudal lords. These included taxes like Feudal dues, Tithes, Tallage, Scutage, etc. In India, Raja Chelliah (1922 – 2009) is referred to as the Father of Tax reforms. Taxes come in various forms depending upon the country you live, for example India which is a developing nation has a very diverse and efficient tax system which includes taxes like:

1. Income Tax: It is levied on individuals and corporations based on their income and profit.

2. Corporate Tax: It is paid by companies and corporations on their business profits.

3. Capital Gains Tax: It is charged on profits earned by the sales of assets like property stocks and bonds.

4. Goods and Services Tax (GST): It is levied on most goods and services and acts as unified taxation system.

5. Custom Duty: It is paid on imported and exported goods.

6. Property Tax: It is charged on property owners.

7. Professional Tax: It is a nominal tax collected by state governments on income earned by a person’s profession or income earned by trading.

8. Stamp Duty: It is applied on legal transaction documents such as property registrations.

It can be observed that India which is only an 80 years old nation has a very complex and detailed taxation system, so at it can be claimed that even the smallest and poorest countries have a taxation system which cannot be easily bypassed by normal citizens. Thus, any problem in the tax collection is a complete failure at the governments end. Predefined income ranges used to determine the rate of income tax (an individual has to pay) are called Tax Slabs.

Following is a list of average tax slabs around the globe:

Income Range (USD)	Income Range (INR)	Tax Rate (%)
Up to $10,000	Up to Rs. 8,20,000	Nil
$10,001 – $30,000	₹8,20,001 - ₹24,60,000	10%
$30,001 - $60,000	₹24,60,001 - ₹49,20,000	20%
$60,001 - $100,000	₹49,20,001 - ₹82,00,000	30%
Above $100,000	Above ₹82,00,000	40%

Now that we understand taxation we can move on to the second subtopic.

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2.   Difference between a common man and a Billionaire

Unlike most people who have to stand for hours at government offices to get their legal work done, Billionaires are treated as VIPs and have access to backchannels in the government most popular example being Elon Musk who is the world’s richest person is also the head of the Department of Government Efficiency which has slashed thousands of federal workers who were inefficient and unnecessary. Thus, it can be understood that billionaires can influence politics and governments by either providing funds to political parties or by bribing their way through the system to get their work done.

Now some people may be thinking that it is easy to just increase corporate taxes and make the wealthy pay their fair share to the society but for our readers who think this way there are a few questions:

·       We know that Billionaires have sophisticated methods to do tax evasion and by increasing taxes we may encourage them to increase the rate at which tax evasion is done. Which will make taxing them useless?

·       If nations decide to increase tax rates it may discourage the Industrialists from investing in those nations causing economic shutdowns in countries with higher tax rates. How will countries deal with such an economic collapse

Don’t worry we will answer these questions in the next subtopic

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3.   How lower and higher taxation effect international and national economy?

Effects of Lower Taxation:

A.    National Economy:

Ø Lower taxation leaves businesses with more disposable wealth which can be used by them to further increase production and since, the consumers will also have more money this will encourage them to increase their purchase resulting in a major economic boost

Ø Higher gains will encourage corporate organisations to do business expansion resulting in increased employment rates, increased infrastructure, increased investment, increased per capita income, etc.

Ø Lower taxation may lead to decreased government revenue resulting in lower investments in infrastructure, poverty upliftment, pension schemes and affordable health care at the government’s end but these factors may be compensated by the economic growth of a low tax nation.

B.    International Economy:

Ø Lower Tax rates will attract a higher number of investors which will improve the nation’s economy and its overall image providing a stable foundation to the country

Effects of Higher Taxation:

A.    National Economy:

Ø Higher taxation results in increased government revenue which in turn increases the rate of policies related to pension, healthcare, education, etc.

B.    International economy:

Ø Higher tax rates provide a very sturdy foundation to a nation which increases its capacity to endure economic downturns like recession and stock market cash

In short, lower and higher taxations effect economies in a number of ways discussed above, from the perspective of an industrialist lower rates are the best but for the common man it’s a bit complicated as lower rates offer higher employment and higher wages and higher taxes offer pension and health care benefits and job security along with free education and cheaper housing and property costs. Higher Tax rates offer cheaper costs of living and an equal society.

Tax Rates	Economic Growth	Currency	Investments
Lower Tax Rates	Boosts growth due to increased consumer spending and business expansion.	Strengthens currency if growth attracts foreign investment; otherwise, stable.	Higher domestic and foreign investments due to increased profitability.
Higher Tax Rates	May slow growth due to reduced disposable income and dampened consumption.	Can stabilize currency through improved government fiscal health.	May reduce investments due to decreased profitability and higher costs.

4.   Has the present system of taxation failed the common man?

In short, no, the present system has not failed the common man but let’s discuss some criticisms:

Tax evasion by the wealthy: though tax evasion is a major problem it certainly doesn’t mean that we tax even the innocent billionaires who do not do tax evasion.

Inequality: some critics argue that tax rates for billionaires should be higher. Even though the tax rates in some countries like Finland, Japan, Denmark, Sweden and Austria go as high as 55 % still some people gather the guts to increase the taxes on the uber rich, plus we have already discussed the negative effects of higher taxations.

Last one being, Lack of transparency: We believe that there is corruption in every government and that the tax payers have all the rights to know what their hard-earned money is being used for, is it being used for the development of the nation? Or for the development of few uber rich people? But increasing tax does not solve the current economic problems faced by the society like rising housing cost, rising cost of living, unemployment, recession, poverty, etc.