Possible Disadvantages, Answers, with Visuals

Persuasive Paper Part 3: Possible Disadvantages, Answers, with Visuals

            Different governments have already considered the solutions that this paper proposes on tax alterations. Many experts acknowledge that there is a growing problem of income inequality and taxation in the world. According to Saez and Piketty (2013), the famous Occupy Wall Street protests that struck the United States after the late 2000s recession were a reflection of the fact that many people consider themselves a part of the 99% that is generating most of the wealth in the world, while the remaining 1% consumes it. However, proposed tax increases on the rich such as those imposed by the French government are unlikely to become an easy solution to this problem.

            One social disadvantage of this solution is that it might lead to a migration of the rich. Recently, the Hollande government introduced new laws that would increase the taxes on any companies that paid employees more than a million Euros. This law was supposed to help France recover from the Eurozone crisis but most analysts explain that it is counterproductive, as it has resulted in the emigration of many rich people from France (Boyle, 2013). This reaction shows that tax increments on the rich could lead to migration patterns that lead to a loss of income for the government. A possible solution is to provide the rich with alternatives that allow them to reinvest their money in the country.

Retrieved from http://online.wsj.com/news/articles/SB10001424052970204554204577023570851326242.

            An economic disadvantage of the proposed solution is that it may lead to unpredictable and unfavorable economic actions by the rich. France provides a good example of this problem as investors and entrepreneurs have started avoiding the country because of the high taxes that they stand to incur there (Vidon, 2012). This has led to reduced foreign direct investment. This shows that higher taxing the rich could be a counterproductive measure, as it would make the subjects less economically productive within their country. This problem can be solved by providing tax breaks for foreign companies.

            Tax alteration is a highly contentious issue in many parts of the world. Even though analysts do not agree, increasing tax rates for the rich could stimulate growth. Such increments could increase government revenue and boost the economy. They could also reduce income inequality. Alternatively, the policy has led to migration of the rich and reduced economic activity, problems that could be solved by offering foreign companies tax breaks and issuing the rich with plausible alternatives to the high taxes.

References

Boyle, C. (2013). The real problem with France’s 75 percent tax. Retrieved from http://www.cnbc.com/id/101300969.

Saez, E & Piketty, T. (2013, October 24). Why the 1% should pay tax at 80%. The Guardian. Retrieved from http://www.theguardian.com/commentisfree/2013/oct/24/1percent-pay-tax-rate-80percent.

Skimming the Crème (2011). Retrieved from http://online.wsj.com/news/articles/SB10001424052970204554204577023570851326242.

Vidon-White, M. (2012, October 17). Stick-it-to-rich tax plan may backfire on France. The Washington Times. Retrieved from http://www.washingtontimes.com/news/2012/oct/17/stick-it-to-rich-tax-plan-may-backfire-on-france/?page=all.