Updated: Dec 13, 2020
"How is it fair that some people have more money than others? I work way harder than some owner of a big company who just sits on his couch all day. What's wrong with just taking a little more money from the rich?" Throughout history, there has always been a wealth gap. This gap is brought about by an endless array of factors.
In the past, there were often systems in place that actually inhibited the ability of the poor or middle class from rising above their birth. In the United States, however, there are no such legal barriers. Anyone can become anything, given enough hard work, and occasionally, luck. So why is there still such a wealth gap in the United States? Why does poverty exist in a place like the US?
88% of millionaires are self-made. They did not inherit their wealth, they created it. So why doesn't everyone create this wealth? Simply put, these people are almost all very financially literate and are smart with the money they have. In addition to that, they almost always work harder than other people. The average self-made millionaire works around 60 hours per week, though some are known to work over 70 hours per week. That means self-made millionaires are working at least 50% more than their average American counterparts. Keep this in mind as we continue.
There is an argument that rich people should pay more money in taxes per dollar that they make than poor people. This system is called progressive taxation. The United States federal government already has a progressive system, in which the more income you make the higher percentage of that income is paid in taxes. Many people find this system to be fair, but is it? Here is an example. If there were two people who made the exact same amount of money every year by working the same job and the same amount of hours, would it be fair to tax one person more than the other? Why then, do we penalize people who, statistically, are making more money simply by working much harder than we desire to work?
Let's use another example. You are married, but your spouse is unemployed. Imagine you are working at McDonald's. You work there as much as you can, but you are only able to work about thirty hours a week, and you are barely able to make ends meet. Your low-income level has led you to be taxed 10% on all income.
But you decide you've had enough of the financial stress that comes with living paycheck to paycheck. You decide to get a second job, which pays the same amount of money per hour and also provides you with thirty hours per week. Now you are working twice as much as you used to be, and due to this, you are making twice as much money. You look at your paycheck from your second job and you are astonished. You are paying 12% on all the money that you earned from that second job! The second job has put you into a new tax bracket, and although you are working harder than your peers, you are forced to pay more in taxes than those who aren't working as much.
This is an unfair system, and the unequal treatment only compounds as people make more and more money. Doctors are punished for spending eight years in college, and financially savvy investors are punished for being smart with their money.
The solution to this problem is a flat tax. A flat tax is a fair tax. Rich people still pay more, but at the same rate. The way it works is simple. For every dollar a person makes, they pay a certain percentage of that to the government. It is consistent across the board. With a 10% flat tax, if I made $1,000, I would pay $100 in taxes, and if I made $100,000, I would pay $10,000 in taxes. I pay more as I earn more, but at the same rate. This is the fairest way to levy tax and many states today use this system.
The rich are already paying far more than their fair share. A consistent, unchanging rate across the board is the simplest and best way to ensure that everyone pays a truly fair amount in taxes. Few people, when given the option, would choose to pay more taxes than their peers. Keep this in mind when supporting progressive taxes. If you were making more money than you are currently, would you feel differently?
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Self-made millionaires: https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html
Millionaire work hours: https://barronmarketingsolutions.com/unpopular-secret-of-self-made-millionaires/
Taxes paid per income group: https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update