Thursday, October 14, 2010
I Can Afford Higher Taxes, But They'll Make Me Work Less
For grade 15 Oct 2010. According to Mankiw, what are the repercussions of raising taxes?
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Welcome. This is a blog dedicated to the students enrolled in the CSHS AP Economics classes. Click on the title of the article, read, and click comment.
An interesting experiment by Mankiw, and quite an enlightening one, at that. As the son of an unemployed former real estate agent and a surgeon, I can see both sides of this debate. On the one hand, the lower classes need government subsidies and civil services in order to put a roof over their families' heads and food on the table. Yet, as Mankiw very aptly indicates, the decision to increase services for the poor detract from the overall productivity of the upper classes because there is less incentive to generate income. If we lived in a perfect capitalist system with completely rational consumers, we would not need civil services. But this is certainly not the case. Therefore, since our society is a balance of socialism and capitalism, we must have a balance of taxes and government programs that both keep the lower classes alive and healthy while maintaining incentives for the upper class.
ReplyDeleteThis article only adds further evidence to the truth that tax cuts aid all Americans. I agree with Mankiw when he says that the taxes on the rich also effect everyone else as well. Its not just the rich who will feel the burden, but everyone else as well. All people are planted firmly on the web known as the economy and tightening one strand tightens the rest of them too.
ReplyDeleteThis article instantly reminded me of Freakonmics, where they explained that a real estate agent never works to sell your house at full potential. What is a few thousand dollars for you will only translate to a few hundred for them, therefore it is not worth their time. It is interesting to see taxes as something that have repercussions beyond the people taxed, as each of these people may not choose to work any extra once the tax makes the money for this work not be worth it.
ReplyDeleteMankiw is correct surrounding the topic of raising taxes on the rich. Although, at first glance it appears that raising the taxes on the wealthy is a good idea and that it will benefit lower-class society, it will not. Increasing the taxes on the wealthy will drastically affect all taxpayers. The economy is basically like a see-saw; if one side is changed the other side is inclined to react.
ReplyDeleteMankiw at first agrees with raising the taxes for the rich. He states that he, himself, wouldn't mind a raise in taxes because he can afford it, unlike the lower classes of Americans who can't. He wouldn't mind to take the burden. However, he also states that raising taxes on the rich will affect the lower classes. Companies who taxes got raised will produce less, thus affecting the rest of us who buy these products. Overall, Mankiw believes that raising taxes for the rich will affect everyone else.
ReplyDeleteThe repercussions of raising taxes on the rich is the effect it will have on the lower classes. If the rich are taxed higher then they will work less because it is no longer worth it. Their products and services will decrease in supply and then prices will rise. These higher prices will then have to be paid by the lower classes. A raise in taxes on the rich will just shift down to costing the lower classes.
ReplyDeleteMankiw basically states that raising taxes for the rich will have a strong impact on the poor. The rich will feel the need to put less effort in their work, thereby resulting in higher prices of goods and services. This essentially results in the lower class having to pay significantly higher prices.
ReplyDeleteraising taxes on the rich has many back end costs and could potentially serve to the detriment of the lower class. the rich will work less knowing that they will be taxed a greater amount, they will have less money to spend on other goods that would in turn help the economy and now that money is going directly to taxes as opposed to directly to the working class.
ReplyDeleteThe repercussions of raising taxes are the rich would work less, and take less incentives in doing other activities to earn more money because it's all taxed. In respect to that, they will have less money in the end to spend on other goods, which would be less money in the economy.
ReplyDeleteThe repercussions of raising taxes on the rich would be less incentive to work thus translating to a less productive upper class society. I agree with this analysis but that does not mean that i can agree with decreasing taxes on the rich. Those making 250+ are well off by my understanding. I for 1 believe that they should be paying more than those in the middle class but not to the point where income redistribution becomes a massive problem. I would let the bush tax cuts expire and then shift the tax brackets so those at the lower class can be given adequate shelter but those on the top are not discouraged from investment. But I must also point out this, many republicans fear that these high tax brackets will lead to lack of investment back into the market. From my point of view, most of this "investment" spending is leisure, such as private jets, fine wine's ect. I believe that it is to optimistic for many to say that this money is considered investment. (although it could be argued that it is investment, it is not within the same caliber as if the investment's were in a company so that they could expand or go global.
ReplyDeleteMankiw believes that one repercussion of raising taxes is a decrease in supply of consumer goods and services. For the producers, it is not financially worth it to work extra hard and provide more to consumers because the higher taxes will take away a majority of their potential revenue. Thus, producers will simply provide just enough to reap the most income with the smallest amount of work and then stop. For the consumers who don't have to pay the higher taxes, they will still end up paying extra money for goods and services because there will be a shortage of them. Thus, it is a lose-lose situation, excluding the government.
ReplyDeleteAccording to Mankiw, by raising the taxes, it would affect the rich and the poor, but mores so the lower class. He believes that if the rich (i.e. corporations) had to pay more taxes, then they will produce less products and therefore affect the rest of the lower class population because they will have to pay more for the goods they need. In the end, both the poor and the rich would not be benefiting from taxes being raised.
ReplyDeleteAt first it may seem that raising the taxes on the rich will benefit the poor but it is only an illusion. By taxing the rich like corporations will cause them to produce less and according the the law of demand, the less produced the more expensive the product is. This means that the lower class has to pay more for goods. All in all taxing the rich affects everyone in a negative way.
ReplyDeleteAs Mankiw reconfirmed, economics is about incentives. I generally lean towards a system in which working as hard as you can and making the right choices gives you success. Naturally, not everyone will work hard and make the right choices, so the ideal of paying taxes for them could be noble, but it depends on how it is introduced. Philanthropy based on choice is definitely more ideal than a tax made through elected officials who get elected by the bulk of the people. We have already stated that the bulk of the people can not be at the top, and since most votes rely on urban population and includes those who would benefit from the tax it can be said that they are voting themselves a raise. So here it is. America has a great free education system (despite its flaws) and if you make use of it, you could get anywhere. Education is the answer, not taxes on the "successful"
ReplyDelete^ I know I went on a tangent at the end. I mean the funny part is that we are just posting for a grade, not engaging in a discussion of each others ideas so it really doesn't matter that I went on a tangent because it is likely that the only person who will read this is Ms. Meachum herself.
ReplyDeleteAccording to the article the effects of raising taxes, especially on the wealthy, will result in a poor outcome for everyone. While the wealthy are paying more taxes, most of them are wealthy for a reason and will figure a way to still gain or remain unchanged in a situation like the one proposed. Instead, the consumers will be affected because they will still have the desire for a good that the producers, the wealthy in this case, have shorted.
ReplyDeleteThe repercussion of raising taxes are that it will effect the entire community in some way. Although the people it is trying to protect will also be hurt. If taxes are raised then the upper class will have no incentive to produce as much as they have been. This creates a problem for the middle/lower class because they are the consumers of these products.
ReplyDeleteBased on Mankiws analysis, it is quiet obvious that the consequences of raising taxes for those who are of the upper class will trickle down to the lower class. As many lower class citizens would at first glance support this idea they would probably be against it if they were educated on the issue. As you increase the taxes for the upper class they become less motivated to earn more money. The motivation decreases as incentives disappear. The upper class will have no desire to produce thus creating even higher prices on goods which the lower class will have to pay for. It is a lose-lose scenario.
ReplyDeleteMankiw is pretty much saying that higher taxes for the rich will only mean a disbalance of the economy for everyone. Equilibrium will definitely be destroyed if the rich are forced to pay higher taxes. With fewer incentives, the wealthy will not want to engage in production or services and this will in turn affect the macroeconomy, and the members of the lower class will be hit with the consequences. The lower class will be left with less goods and higher prices. So a seemingly good idea for them will turn into a surprise nightmare.
ReplyDeleteMankiw begins this article in favor of a tax raise—or so it would seem. He then analyses the amount of money saved by the end of 30 years if he were to accept a job paying $1000. He comes to the conclusion that, after taxes are taken into consideration, he is left with $9000 less than what would have resulted had there been no taxes. With only an $1000 dollar gain over 30 years, there is little incentive to take that job. Many upper-middle class people take this into consideration and decide not to take a job, thus lowering the amount of services provided to people of all social ranking.
ReplyDeleteYes....and we do hope that we all create discussion rather than just reporting the news!!
ReplyDeleteIn a new york times poll, almost everyone (90 something percent) of the people felt the wealthy should be taxed more heavily than the middle and lower classes. The next question revealed that less than 1% of the people polled considered themselves upper class citizens. Naturally, the lower class wants their money to go to the government so they can get welfare and other programs that benefit them, but in reality, taxing them will hurt the economy as a whole. The upper class will not have as much motivation to make more money and be as productive as possible. They will be hurt by the taxes and try to avoid them at all costs. The wealthy that are on the line will make sure they stay just under.. so you better hope your doctor doesn't take the day off because he doesn't want to make any more money.
ReplyDelete