3 Reasons to Lower Income Taxes
Article I of the United States Constitution grants Congress the power to impose federal income taxes. The first income taxes were imposed in 1861 and were used to fund the Civil War. Since then, the income tax has become a contentious area of political debate. Many people believe that high income taxes depress economic growth and amount to government confiscation of private property. There are several reasons that income taxes should be lowered.
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Rationale
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Income tax is designed to fund basic government activities, such as building roads and raising an army. It also is used to redistribute wealth by taxing higher incomes at higher rates while creating government programs that benefit low-income groups. Income taxes also are used to fund socially worthwhile but unprofitable activities that cannot attract private funding, such as developing expensive drugs for rare diseases or loaning money to college students with no credit history.
Individual Freedom
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When a government taxes its people, it is forcibly confiscating wealth. Even when taxpayers benefit from government programs, they do so on terms established by government bureaucrats instead of spending their money as they see fit. This results in a large, inefficient class of government bureaucrats and reduces the freedom of the individual taxpayer to enjoy the fruits of his own labor.
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Incentives
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A national economy is essentially a set of interlocking incentives to produce, distribute and consume wealth. When a government taxes an activity, it makes that activity less desirable by imposing a cost on it. When it subsidizes an activity, it makes that activity more desirable by creating benefits to engaging in the activity. The income tax burdens those who produce wealth to pay for government social programs that subsidize unemployment. This discourages taxpayers from working hard and encourages citizens to rely on government handouts based purely on the economic laws of supply and demand.
Government Revenue
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Intuitively, government revenue should increase as income taxes are raised. However, excessive taxes can actually lower government revenue. High income taxes divert taxpayer money from private investment initiatives to inefficient government programs, resulting in fewer employment opportunities. As the workforce shrinks, tax revenue drops and government expenses for unemployment programs and welfare benefits increase. For this reason, many economists assert the existence of an ideal income tax rate -- government revenue will drop if it imposes taxes at a rate either above or below the ideal rate.
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