Research paper Essay Example | Topics and Well Written Essays - 1000 words - 3

Research paper - Essay Example The essence of all these tax systems is to collect tax for the government, and enhance the ability of the government to provide essential goods and eservices to its citizens. Nevertheless, the application of different types of tax systems and their calculations have been confusing to the citizens. While some tax systems seem to create equality for all people, regardless of whether they are rich or poor, others seem to favor the poor, by making the rich pay higher taxes. Taxation should have a neutral effect on all people, considering that it is not a voluntary contribution, but an enforced contribution established by the laws (Robert, 194). Nevertheless, to help close the gap between the rich and the poor, and create a system of fairness, people should pay taxes based on the income that they earn. Therefore, the rich should pay higher taxes than the poor. Making the rich pay higher taxes than the poor will increase the efficiency of income distribution in the economy. When the rich p eople are taxed higher than the poor through the progressive tax system, which increases the rate of taxation with an increase in the income to be taxed, the amount of tax obtained is relatively higher to the one obtained when a flat rate of tax is applied (Robert, 191). This being the case, it increases the amount of resources that the government has at hand, which can then be reinvested back to the economy, through enhancing and increasing the provision of goods and services to the citizens. However, if all people are taxed at a flat rate, the rich will certainly save more than the poor, since after the taxation, they will be left with a higher amount of income. The problem with this concept is the fact that the rich may choose to save the extra income they have, other than reinvest it in the economy, creating a shortage of the resources circulating in the economy, thus making the provision of essential goods and eservices inefficient (Robert, 196). Therefore, the intervention of the government to ensure a higher taxation of the rich, compared to the poor is vital, since it forces the rich to release the extra income and place it at the disposal of the economy, where it can be used to serve all people, and mostly the poor, through providing them with essential services, since they need them more than the rich. Another reason why the rich should be taxed more than the poor is the fact that this would increase the purchasing power of the poor, who are the majority in the economy. Taxing the rich more than the poor means that the poor will be left with a higher percentage of their revenues at their disposal (Robert, 192). This makes it possible for their purchasing power to be increased, which also serves to stimulate the economic contribution they make to the economy. The higher the purchasing power of the people, the higher the contribution they make to the economy. Additionally, taxing the rich higher than the poor will make it possible for the poor to save a substantial quantity of their incomes, and then start investing into the economy through starting small businesses (Robert, 195). This is beneficial compared to taxing all people at a flat rate, which would mean that the rich people would save more of their incomes than the poor, since the rich do not necessarily need to invest. Therefore, while income in the hands of the poor is