Why Do Rich People Worry About Taxes – The country runs by tax and if people don’t give it, the country cannot run. People don’t really have a choice if they want to pay taxes or not. It is must.
Why do rich people worry about taxes even if they have a lot of money?
More taxes due to more wealth:
The answer is simple to this. The more money, the higher the taxes. I shall explain this using an example so that you can understand it better. Suppose a person in the United States of America earns around 50 thousand dollars a year, and the tax on that income is 15 percent. If we take out 15 percent to 50 thousand dollars, we lose around 6 or 7 thousand dollars in taxes. The person takes 43 or 44 thousand dollars home. If another person earns 100 thousand dollars a month, he will have to pay 30 percent of the amount in taxes. The deducted amount will be 30 thousand dollars, and the person will take only 70 thousand dollars home.
Rich people invest their money in LLC.
The rich people earn millions, as a result, their tax rates are also very high, and so a greater amount of money is deducted when you earn more money. As a result, rich people have to worry even more if they have more money as taxes will cut a lot of money.
To save themselves from these situations, rich people invest their money in LLC. They trick the government into paying taxes as they immediately invest the money they receive so that they do not have to pay any taxes.
Suppose a person earns 250 thousand dollars and follows the method of LLC, he will pay low tax as the money is invested. As a result, the person will take as much as 215 thousand dollars. It applies extra tax pressure on the middle class, and as a result, the middle-class community complains that the rich are not taxed enough.
Difficult to give away hard-earned money:
Moreover, no one wants to waste their money on other causes. I will explain this using an example so that you can understand it in a better way. Ask yourself, if the government gave you a choice instead of a restriction if you want to pay taxes or not, would you want to pay them? No, you won’t, and there is nothing wrong with that as it is human nature.
It does not matter if you have earned money by picking grapes or by studying hard for it and getting a good job to earn it. It also does not matter if you have earned it using unlawful means. It’s human nature and a psychological problem for every human who had earned even a penny during his life. The rich have a lot of money, but that does not mean that they would be happy about paying taxes, even if it affects their money slightly.
Unfair tax system:
Moreover, sometimes the tax system of a state is unfair for the rich and the poor. The government gives special incentives to the rich companies by reducing their taxes. These companies make deals with the state and ask them if they could reduce their taxes in return, the company will provide jobs to some people of the state. The government agrees, but it still collects taxes from other businesses and people. When tax collection reduces, they raise taxes on the same people, and hence they are burdened by it.
I can give you a real-life example of this situation. There are two companies establishes in the city of Oregon, and these companies are name Nike and Intel. Intel is a tech company, and Nike is a shoe brand, both of them have set up their units in the city of Oregon. They enjoy special benefits that are provided to them by the state. These companies are exempted from paying property tax, but other businesses in Oregon have to pay these taxes. As a result, these businesses and the property owners will have to face a disadvantage by paying extra taxes to cover the tax exemption of these companies. It is why the rich do not feel like paying taxes even if they are rich. No one can withstand inequality.
The government should tax the rich even more
Moreover, some people become rich when they inherit a business or property from their parents. But what about the people who work day and night and take them up to the position so that they can be called the rich. They have a long-struggling background, but neither the government looks at that and nor the people. You must have heard some middle-class people saying that the government should tax the rich even more. Why should they? Just because they worked hard and you couldn’t reach the position they are in.
I’ll give you the example of jack ma, the owner of Alibaba. Jack ma had a past full of struggles and hard work, and due to that, he reached the position he is in now. Moreover, jack ma was also rejected from several jobs before he made his breakthrough by launching Alibaba. Do you think it will be fair if we tax jack ma more than other people? As a result, the rich consider it unfair even if they have too much wealth.
Fear of losing their money:
Another reason why they worry about taxes is that they fear they can lose all their money by taxes. Why do you think lottery winners lose all their money so quickly? Because they don’t worry about taxes. If you avoid looking at the tax rates, you can lose a lot of money. It is why many rich businessmen invest so much in hiring the best tax lawyer in the region. They want to reduce their taxes as much as possible because if they pay too much in taxes without even looking at the actual tax rate, they might lose all their money.
Biased tax system:
Moreover, another reason for this is that the tax system is biased. Employees pay lesser in taxes because the company does the taxes for them when they are provided with their salary pay cheques. As a result, they have to pay only 10 to 15 percent in taxes. The top 20 percent people include mostly the rich, and they pay around 84 percent of all the income tax whereas the lower class only pays 47 percent in income tax. Then why would the rich not worry about the taxes when they are paying almost all the income taxes to the country.
They want to save more:
Once a wise person said that money is an addiction, and once you are addicted to money, you will want to earn more and more. The same is the case with the rich. Their first-ever mega income gave them their addiction to earn money and so they have a fear of losing some portion of that hard-earned money.
A rich person runs his business on two principles, and they are profit and loss. They will try their best to gain more and more profits and to reduce their losses to the maximum. They believe in the flow of wealth and taxes seem to slow down that wealth. The rich consider the taxes as losses due to one reason. The reason is that if they were to not pay taxes, the tax money could be invested somewhere else and can gain profit from it. That is not possible if they pay their taxes, and hence they will count them as losses.
Disadvantages of taxing the rich more:
Although the United States of America can have many advantages by taxing the rich extra, there are disadvantages related to this too. Tax collections will increase, and the country may prosper, but the rich will slowly and gradually move away from their countries. Some of the disadvantages leading to wealth tax are:
The main con of taxing wealth is that it leads to double taxation on the richer people. Tax rates are different from the rich and poor, but there are more things that the rich have to do, and the lower class does not. The government has said that the rich will have to pay an annual tax and this would be separate from other taxes. It means that the rich would be paying for types of rates. The first is the income tax they will have to pay on their income and the second one is the yearly tax they have to pay to the government. Since other people are poor, they are not forced to pay the annual tax.
Leads to capital flight: first, let us talk about what capital flight is? In simple terms, capital flight is when an organization or a person transfers his money to another country due to some reason. When taxes become unbearable for the rich, they adopt ways to reduce them, as a result, they use capital flight. They use the capital flight technique to transfer their assets from one country to another. They will choose a country that has lower tax rates and shift their business there.
Moreover, the rich might also get rid of their American citizenship. It means that they will no longer be the citizens of the United States of America. It helps them in reducing the extra tax applied by them when they run their businesses. The greater disadvantage is for the country because when they lose their citizenship, the taxes will reduce, and hence the country will collect fewer taxes to support the poor people.
Leaving the country:
The rich have enough resources to shift their business to another part of the country also move out of the United States of America. They do this to save themselves from the extra taxes that the government of the United States applies to them.
Moreover, this is not beneficial for the country. The rich buy luxury item and those items have higher sales tax on them. As a result, if they move out they don’t buy those items and the government of the United States would be deprived of collecting those taxes. It will further reduce the tax collection of the country.
Wastage of money:
The government of the United States of America wastes a lot of money on things that do not benefit the country. One example of this is that the government of the USA spends too much tax money on buying and producing Mikey equipment to make sure that they are superior in the military from their countries. The tax money could be used to eradicate poverty in the country. So if we tax the rich more, it will upset them. and the government will have more money to waste.
Heavy taxes halt growth:
Applying taxes is a very sensitive matter. Because it has pros and cons for taxing the public very little and taxing the public more. If we tax the public less, there won’t is enough money to run the country, and hence the country can go into default mode.
However, there are higher risks if we tax the rich more. Rich people run some sort of business, and these businesses support their lavish lifestyle. The talented business and people might not want to stay in the country and leave with their family and go to countries where taxes are low, and their income is not deducted. Forcing them to pay heavy taxes will create a situation in their minds that instead of the government appreciating them for their services. They are applying more taxes on them.
Most economists have argues that heavy taxes on the rich make the market steady and it does not grow to its full potential. But what does this have to do with higher taxes on the rich? As I said before, the rich invest, and they run businesses. If the government applies more taxes, they will always fear that if they invest more money. Hey government will ask for more and more taxes. This clouds their judgment and prevents them from taking and business risks. When they don’t take risks, they don’t prosper and as a result, it halts the economic growth of the country.
The decrease in revenue collection:
When taxes are applied to the rich, they find ways to reduce their taxes to the maximum. Due to this, the richer class is forced to take steps to alter their investments and business strategy to reduce their taxes. The lessee they pay in taxes, the lesser will the government have the money to run their country.
Reduce in investments:
When taxes are high thee people refrain from investing their money. Because they say that the money should stay in the bank than investing and reducing the total amount. Some of it is paid in taxes. If there is a lesser investment, lesser businesses will be set up. If there are not enough businesses, more people will be unemployed as there would be no vacancies to adjust those people. Ultimately it will affect the overall GDP of the country.
Donations to charity reduce
Moreover, when heavy taxes are applied on the rich. They become so involved in saving their money from being consumed by the government. And they pay no interest in donations. I mean who would want to pay donations when they are already losing so much money to taxes. Higher taxes do help donations. But they cannot carry out most of their activities if the rich do not pay them directly. As a result, the organizations that are liable for donations receive less. And as a result, they will have to shut down leaving many people homeless and hungry.
Divides the American public:
If you tax the rich more, they will feel that the government is not treating them fairly. Because they tend to take more money from the poor. And it leads to a moral division between the poor and the rich. The poor complain that the rich should pay more in taxes. They have the money, and the rich complain that they are not treated equally. Because the government does not tax the poor enough.
We conclude that there are many reasons why the rich worry about taxes because of just one reason. They do not want their wealth to reduce and go into bankruptcy. Moreover, we argued that although there are many advantages of taxing the rich, there are disadvantages too. The biggest disadvantage is the moral disparity between the rich and the poor.