Paying the Price for Tax Reform

Navya Yemula ’18

Amidst the chaos of this year’s election, we all must question the efficacy of the candidates’ solutions towards all our nation’s issues, but more specifically—tax reform. Both candidates bring interesting arguments into retrospect and, through the outbursts and “tame” insults, I valiantly bring forth my own proposal for tax reform. However, in order to understand the intricacies involved in government tax policy, let’s begin at the start of taxation.

Our nation built its reform system nearing the end of the Civil War in 1865 when the government needed a source of income. Simply to support the government in any way possible, the upper class paid income taxes in low proportions. Unfortunately, the need for money never ceased, especially due to World War II, and the government resolved to impose income taxes on all working class families, raising the number of income tax payers by 400 percent. The imbalance in our nation’s taxes, differentiating between income, state, property, and consumption taxes, translated into today’s tumult over how to solve this pressing issue (Yale Unbound).

Like all great problems, no perfect solution exists. The first step towards “tax-reformed” peace would require a decrease in income tax, which essentially constitutes the majority of paid taxes. The honest truth: soaring income taxes create the most cumbersome burden for middle class and lower class families, directly due to slow economic growth and unchanging wages.

Commenting upon the impact of income tax in her life, Shivani Pillalamarri ’17, states, “I was not affected by taxes until I got my first job… once I got my paycheck and looked at the amount taken out for income taxes, I was a little shocked.”

Similar to many workers, Pillalamarri experienced a faint sense of loss when she realized that the work she completed was awarded only after removing a significant portion of her wages. Conceptually, reducing income taxes (and the stress they cause individuals) would certainly allow for increased disposable income. On the macroeconomic scale, this prospect substitutes economic growth into the equation; when American families have more money in their possession, they will spend it on goods, which will boost the economy and lead to potential economic growth.

The United States desperately needs economic growth, which will in return increase wages for families—something Hillary Clinton strives to achieve. Clinton believes that “[t]he wealthiest pay too little in taxes while the middle class needs more relief. [She will] give tax relief to working families who are struggling with costs from college to health care.”

Agreeing completely with this, Jenna Yang ’18 comments, “I support Clinton because I think in this country there is such a wide gap between the wealthy and the poor, and the less wealthy people deserve to live life just as comfortably as the rich, only achievable if they pay less taxes.”

The main issue of America’s current tax reform derives from its unnecessarily expensive income taxes. Numerous other countries around the world view the United States as paying comparatively “low” taxes, yet they do not see the branches of America’s tax system. The consumption taxes and luxury taxes specifically do not surpass 5% of the government’s revenue from households, whereas income taxes form 85% of the government’s tax revenue. Nations from around the world have an average of 11% of government tax revenue from consumption and income taxes, and their average GDP lags behind ours by only one percent (Yale Unbound). The facts do not lie.

Tax reform, as stated, poses never-ending issues, for it has numerous complexities concerning tax rates, who primarily pays the taxes, and the taxes’ benefit to society. Though many solutions will come to light, the first step to follow through must be a reduction of income taxes. From America’s early history to America’s oncoming future, tax issues constitute the main problem for our nation, and by attacking it at its source, the United States will financially heal and perhaps enter a well-deserved economic expansion.