Economy Recovering Without Tax Hike

Last updated on March 29, 2022

The primary solution to the country’s large deficit is to raise taxes. Time and again, political parties and the media have pointed to a hike in taxes that would be necessary to cut down the massive debt the country has collected during the recession. There has not been an increase in taxes for the majority of the population, yet the economy has slowly been recovering.

Raising taxes on the rich has been proposed by politicians and the President. The wealthy, who constitute only 2 percent of total taxpayers, would see their income tax rates rise to its highest level in years. Out of those 2 percent, only 1 percent would pay more taxes. Payroll tax cuts expired that led to the hike in taxes for a major part of the population. That contributed in an increase in the revenue. Till now, no major tax hike has come into effect, but the economic is recovering in spite of it.

To reduce the deficit, there may be a rise in taxes for the rich and/or a slight, increase in taxes across the board. In a sensitive economy, the psychological effect of a tax increase cannot be ignored.

It has been debated that a rise in tax rates for the rich may stunt economic growth because the rich would reduce their expenses. However, if taxes are raised across the board, even if slightly, it might lead to less spending overall, and that would hit the wealthy class even harder than a marginal tax rate increase.