Rich people should pay more taxes

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Moderator’s remarks

Since we are all living in modern nation states, the question of paying taxes is relevant for all of us. One of the fundamental roles of state is its re-distributive function. In order to redistribute the wealth, people have to pay taxes which generate the revenue of state. The problem arises when we start to discuss how much every citizen will pay. Basically, there are three types of tax systems. First, progressive system of taxes means that the more you earn, the more you contribute on taxes. Second, proportional tax system means that the state imposes the same rate of taxation regardless of income. Third, regressive tax system is the opposite of progressive system. That means the more you earn the less you contribute to running of the state.

The question of paying taxes touches upon the value of fairness. Fairness itself is a value. It is not measurable object. Therefore it is more abstract concept of our personal values. I am very glad that both speakers in the debate discuss the question of fairness in their papers. You can evaluate their arguments in discussion forum below the text.

The second problem which is situated in both papers is the issue of state spending. Marine, affirmative speaker, claims that the state spends its money in useful areas of public. On the other hand, Michele, opposition speaker, claims that state spending is inefficient and corrupt. Well again, it is up to you to evaluate the arguments.

My last point covers concluding remarks of both papers. Marine’s paper is longer than Michele’s one (which violates Guidelines for Speakers, by the way) and is offering many examples. It is laudable to provide such a big variety of examples, but examples themselves are not always persuasive enough. Michele’s paper is brief and clear. The briefness of his text, however, does not influence overall quality, because he covers all relevant points. Therefore, I hope that every reader will find his/her interesting points in the debate. And do not forget to comment!

Affirmative speaker of the debate: Marine Betrancourt (AEGEE-Lyon)

Opposition speaker of the debate: Michele Turati (AEGEE-Brescia)

Ivan Bielik, Speaker of IPWG


Defend the motion

Marine Betrancourt, AEGEE-Lyon, is student of Political Science and Law at University Lyon III, France.

Paying taxes is, fundamentally, political. How do you want to rule a state without money? The first idea of “state” came from raising money to kings to run the war and defend one’s territory. Now, the idea of “state” has evolved, whether you, only, see the “state” has merely a regalian one, only assuming the basics of society or more, as the “welfare state”, protecting the citizens all along their life. However, you see the “state”, all citizens are part of it, working and living, somehow, thanks to it and in this logic, it seems legit to pay taxes, if somehow, one will see a benefit for society in it. Moreover, the process of taxation has been evolving with democratization and government budget has to be voted by the Parliament. Everybody is part of society and is getting something from it, and rich and poor and middle-class should pay taxes according to their wealth. Therefore, richer people should pay more taxes than poor people.

People may not like paying taxes, people may see it as a loss of money they earned, people may say it’s misused, it would be wasted, but what about when one is earning so much money, they don’t need?

Last May, François Hollande (Socialist Party) was elected in France, one of his promise was taxing 75% the upper 1 million € of people earning more than 1 million €/ year. The law passed the Parliament and the Senate, but was refused by the Constitutional Council, last December, on the constitutional basis of equality in front of taxation. It raised a lot of concerns. Gérard Depardieu on upmost mediatic coup decided to flee to Belgium, Montenegro -and in the end, went for- Russia not to pay taxes. He argued he started from nothing and made his wealth on his own. On his own? Can you really assume you made your wealth on your own and that you shouldn’t give back to society?

Basically, you can hardly make money on your own. If you’ve been successful, you didn’t get there on your own. You will, always, have needed exchanges with people and have been part of society for it. Therefore, being part of society also means using what it has to offer. To continue on the example of Depardieu – but he’s not the only one sneaking out of France because of taxes -, if he succeeded it was, also, because French cinema is, funded -thanks to the French cultural exception – on subventions from the government. Subventions funded by taxations. He didn’t make his wealth on his own. Neither did all the “rich people”. They needed people to buy the goods they were selling.

Fine. He didn’t made his wealth on his own, but now, it’s his money. Well, Thomas Malthus, British economist from the 18th century, was saying “It’s not in the power of the rich to provide the poor with something to do and something to eat, and therefore, the poor have nothing to ask them” – “Il n’est pas au pouvoir des riches de fournir aux pauvres de l’occupation et du pain, et en conséquence les pauvres par la nature même des choses n’ont rien à leur demander.” Right. What about the gap between the rich and the poor? Everyone should stay with what they have? What they earned? What they inherited? Indeed, it’s such a successful choice! Look at the US, from 1932 to 1980, people earning more than 2 million dollars a year were taxed the upper 2 million dollars up to 80% – and this, without hurting the American dynamism, thanks to the liberal Reagan’s turn in the 1980′s, slums in the middle of L.A, while a few kilometres further, some are living the “grande vie” in billions dollars villas.

Not going in an extreme example and in time of crisis, letting rich people pay more taxes seems pretty legit. Everyone has to pay its part, according to what one earns in order for the society to run. Education system, health system, social security system, security system, administrative system, they all run because of taxes and redistribution. And taking the example of France, usually, everyone is pretty happy to go to the doctor and only pay one effective € – 26€, but 25€ reimbursed, to have free emergencies, to be treated at the hospital and barely pay anything, to have free education until graduation and merely pay 400€/ year at university, to get a minimal revenue on a time period when you’re unemployed or sick and ride a car on concrete and safe roads. And if not, one should think about the extra-cost of a private security system, a private health system, a private education system.

Another typical example may be the one of Bernard Arnault, French magnate and businessman in the luxury industry (LVMH), declared by Forbes as one of the fifteen richest men in the world. If he had the intelligence to work strategically to end up at the head of the international luxury industry, he, also, built his success on the long-time image of France as “pays du luxe et du savoir-vivre” and thanks to the quality “main-d’oeuvre” (labour) of its workers -healthy and educated thanks to the public health and education system funded by the government on taxations. But here is not my point. For the last ten years, Bernard Arnault had financial strategists and legal counsellors helping him creating foundations in Belgium where he put all his money to avoid paying taxes on succession as his heirs would have had to in France. He deserves his money, but as one of the fifteen richest men in the world avoiding sharing his wealth by refusing redistribution is disgusting.

No one – just, as Bernard Arnault – may like paying taxes, but on an ethic and moral point of view, it is, just, fair, just, as it is, also, economically more efficient. For Warren Buffet, American magnate, avoiding paying taxes and living out of annuities is going against the capitalist spirit of entrepreneurship and somehow, innovation.

He – Warren Buffet – is one the leader of the US call for rich to be taxed more, movement who got world wide as German, French and others European wealthiest got into it. In Germany, if the wealthiest of all – with a capital wealth over €500,000 – were taxed 5% over that ceiling for the two first years, and thereafter at 1% or more, it could raise €100bn.

Therefore, in a time of crisis, while more and more countries are struggling with their national debt and leading austerity policies, cutting back funding on public services, I believe, that rich people should pay more taxes. It is not about getting one’s money stolen by the state, it is about giving back to society for the success they had thanks to it. It is about sustainability of our future generations, so they can live, just, as good – or better – as this generation had. It is about society in the long-run and seeing further than one’s own little golden world. A healthy democratic state needs taxation, and therefore, rich people should pay more taxes – except if we want to end up in an oligarchy.


Against the motion

Michele Turati, AEGEE-Brescia, studied Finance at University of Brescia, currently working in Wroclaw.

First of all, rich people already pay more taxes, which we all believe it’s fair. Direct taxation is proportional to the income and indirect taxation is related to consumption. The more you consume, the more you pay (fair). The less you consume, the less you pay. If you consume you have to pay (fair). Simple J

The point here is to be fair, we don’t want a new hero to redistribute our money because this modern Robin Hood can only be the central State and we all know how inefficient and corrupted each State is. The risk is to tax more wealthy people and waste this collection on corruption and bureaucracy while only a minimal part will be redistributed in means of services to the community. More revenue for the government is not the answer. They have more than they need already. The solution is to stop spending; distribution of wealth is eaten by inefficient spending. That’s point 1.

Point 2: richer people do spend their money and generate growth. The whole economy is based on production of goods which is purchased by those who has money to buy. If we reduce (also by taxation) the wealth of men, they have less purchasing power and therefore buy less stuff. When we buy less stuff, producers receive less money, make fewer investments and generate less growth in a negative cycle.

Do not forget one key aspect: what motivation do people have to succeed if you are going to increase the percentage they pay into the system the more they succeed? One of the ten principles of economics is that people respond to incentives. If you take away people’s incentive to get rich by taxing them more for earning more money, the incentive to the population is to not get rich. Thus, we lower our entire society’s motivation to higher standards of living when we tax the rich more.

Nevertheless, do not forget one simple point: Robin Hood was a thief!



14 comments to Rich people should pay more taxes

  • julien  says:

    taxing rich is not a simple act of a country. In today’s globalized world, rich people are able to choose where they will put their money, where they will spend it.
    By creating a fear of spoliation, overtaxing the rich is simpling making them flee to other countries.
    So the result of increasing taxes for rich is that the growth generated by their wealth (in direct consumption, companies) is going to other country.
    So overtaxing rich is demagogic, making the “poor” believe that they will get a share of the rich, while effectively having a worse (but invisible) loss of growth/investment

  • Jola  says:

    Regressive tax system could be good solution to motivate young people to work more for precisely paying less, but on the other hand higher taxes for rich people are, as Marine wrote economically more efficient and seem to be simply fair.
    Maybe proportional tax system is, in fact, the best solution?

    • Ziggy  says:

      Motivate young people to work? How about motivate employers to employ young people? that’s the real problem. Young people are not working because they are the black sheep of the working people and corporations, simply because corporations prefer to be efficient, and it is more efficient to hire an older, experienced worker than it is to train a young, inexperienced worker.

      Money is the drive of everything, and greed is only spreading. The only thing helping young people is the labor movement, giving young people the ability to easily find dead end jobs with half decent pay. In today’s standard, young people with university degree’s wont get them very far until the older people retire/die off. Until then, those young people are stuck flipping burgers or processing goods in a factory.

  • Mane  says:

    I think the taxes must be constant non progressive or regressive

  • Mugabe  says:

    I am happy to see that most of the voters are against being robbed by a gang of psychopaths with guns.

    @Marine
    Your main point is that people who live in a society owe something to it and that the government can lay a claim to that debt. I don’t think I owe anything to anyone, everything I receive is given to me voluntarily and I always meet my end of the agreement. If I happen to give something to someone, I don’t later assault them and demand that they give me the contents of their wallet, or else I’ll throw them in a cage or shoot if they resist, which is exactly what the state does.

  • Mickey  says:

    It’s not about being robbed, the point is that the State is bloody unefficient and higher taxation won’t be used to redistribution of wealth. It is well known that some wealthy richmen set up foundations aimed to help financially specific categories of people. The amount invested from these foundations is in some cases higher than the amount the same Country is allocating for the same group of unlucky citizens (and the same rule applies to financing Arts). This new point wouldn’t be possible with an even higher taxation to those wealthy people who are voluntarily financing Arts or Charity organizations/foundations.

  • armin  says:

    Higher taxation of the rich follows most propably – as already described – tax evasion of rich people. It also means that there is no use for a higher income at a certain point (at least in the progressive case). This, however, could lead to two states:
    One is – as also described already – the decline of efford people invest in their jobs; the other could be a simple decline of wages since higher wages mostly result in higher tax income for the government.
    Lower taxation could result in civil unrest since the ones who experience the crisis
    in their own life are belonging to the lower and middle class. Hence, the regressive
    tax system should be taken out of consideration already by simple logic. The benefits of becoming a tax haven is considered to be stealing the money from other states (seen by the political discussion between Germany and Swizerland some years ago, but also other like Liechtenstein). In a united Europe this would kill the last rest of solidarity to the refering state.
    I prefer a slight version of the progressive case as we have it in Germany – raising
    taxation with a saturation after a certain amount of income. The saturation is the
    crucial point since it can prevent the tax evasion, as long as the saturation point is
    chosen wisely – tackling Julien’s opinion (16.2.13).
    Concerning the point of uneffectivity of the state (Mickey, 21.2.13): This highly depends on the state
    you are talking about. However, one could count on rich people to give away a
    part of their money in order to help poor – but taking a look onto history will
    disabuse you…
    Whatever counterbalances the power of the rich has to be equally powerful – the state as the next adress is logical in my opinion, but its efficency strongly depends on the government which is therefore often bribed by rich people and/or lobby organisations.

    At the end it is all about keeping the money in the system (state economy) in order to enable all the people to participate in economy – wherever this fails the state (and sometimes also society) fails. From this I derive my opinion that rich people AND the state have change their behaviour whenever that happens – hence, a higher taxation in combination with higher efficency of money distribution bureaucracy.

  • Jorge  says:

    I think people don’t realize what reality really is, as this video shows: http://youtu.be/r4yh9fzuqRE
    The differences between rich and poor are insane and becoming increasingly bigger since decades ago. And it seems that we shouldn’t do anything to stop it, otherwise rich people will get angry and will go away with their money. The rich are who should be afraid of the reaction of the people, not the opposite. They are rich thanks to the people who buy/use their products. If the people would stop buying their products because they evade taxes, contaminate the environment, have their workers under bad work conditions or whatever other unethical practice, they would stop doing it. In the information age, companies should be the slaves of the consumers, not the opposite! Just organization and will is needed. However, most of the people seem to not be able to do anything except to complain for their situation, but not to act, and to defend what is theirs, but not to care about others.
    Also governments could avoid tax evasion with more coordination among them, agreeing in common tax policies. However, they seem much more permissive with tax havens than they are with the countries with debts (as Greece, as the closest example right now).
    It’s in the hands of governments and people to avoid tax evasion.

    • armin  says:

      You are right, but this requires some conditions:
      1. As you already said you must organize yourself and others.
      2. You must be well informed in order to look at least half the way through the process.
      3. You must be stubborn as a goat since you will hit the same walls time and time again until you proceed for sure.

      All together it is cumbersome and exhausting – this is not meant to be an excuse but rather an explanation: It’s not as if people do not care – they are not willing to put a lot efford into it as long as they can live their life (more or less). One only becomes rebellious when it is really “a pain in the ass”. All in all: Situation is not bad enough in order to encourage the majority, still.

  • Tjeerd  says:

    If you would have a country where there is really low tax for everyone but barely any social security and a a country where is a lot of tax on rich people but a big social security apparatus, and the amount of resources in both countries is the same, the amount of corruption is the same and the education levels are the same you will see the following:
    -The rich people will go to the country with low taxes.
    -The middle class will provide services to the rich, and follow the rich.
    -The working class will have to follow because they find better job offers in the country with low tax, because low tax means a better environment for companies.
    -The people who are incapable of working will go to the country with social security.
    You end up with a country that is prosperous, and a country that is broke.

    • armin  says:

      Well, if this would hold in reality, all Scandinavian countries must have been completely ruined – but they are not, as you can see.
      Your argument chain can be broken the following way: Companies orientate not only on the amount of taxes to pay, but also a lot more circumstances. F. eks. a country with a high tax income can spend much more money on a good infrastructure which is crucial especially for bigger companies; also the educational level is used to be higher and hence, the workers have higher qualification which makes it more favourable to go to a high tax country.
      Another thing that you imply is a extraordinary high mobility of people and goods which, still, does not apply to our interconnected world – you do not “just move” your whole existance and centre of life to a totally new environment, if the taxation rises in a still bearable way (that’s the magic in taxing people “the right way” which always had to be managed by politicians throughout the whole human history). Last but not least a country full of unemployed people is not necessarily “lost” in a economical way – from hereon it will attract companies which seek for cheap workers, employment will rise. With it there will be a strive for better employment rights and – if done correctly – more social structures; in that way a country can stand on its own feet again, if policy is done wisely and thoroughly.

  • ruchika  says:

    i thought that people have to came honest on this they have to pay according to their income guess plssss……… make our country develop

  • armin  says:

    SPAM! Seems like we need a bot filter even for such a site…