Taxes are an essential part of society. Taxation is based on the social contract manifested in terms of money. People provide funds for the government in exchange for services from the government. Thus, the main purpose of taxes is to provide funds that the government uses for its operations, various services, and projects. Taxes are used to pay for the salaries of employees in public offices. In addition, taxes are used to pay for infrastructure projects and services such as health care and social security. Proponents of tax increase argue using the benefits of taxes. The necessity of taxation is also frequently used to support tax increase arguments.
This article explains the side of those who support tax increases. However, note that raising taxes is not always acceptable or beneficial.
Reasons for Raising Taxes
Government expenditure continues to increase. Bailouts and large-scale investments to save the economy are just some of the most notable indicators of this condition. The government’s budget deficit also remains significant. These conditions lead to the government’s decreased financial security, which is significant in providing public services. The problem is even worsened by the fact that the cost of health care services keeps increasing. All of these conditions show that the financial needs of the government have increased, while government revenues have not increased commensurately.
Reason 1: Reducing government fiscal deficits. Deficits are one of the reasons for raising taxes. Governments continue to experience fiscal deficits. The federal government continues to run on deficits. Even local governments run on deficits. These conditions emphasize the need to increase taxes. Economic theory suggests that governments running on deficits contribute less to optimizing economic growth and stability.
Reason 2: Improving social security. A main reason why taxes should be raised is the declining fund for social security relative to population and demand. These funds ensure the health and wellness of the people. By raising taxes, funds for social security are increased. More social security funding contributes to the stability of the human capital of the country. Improved human capital leads to a more productive workforce and a growing economy.
Reason 3: Support for more government projects. Another reason for raising taxes is the need for more government projects. These projects help increase employment and the money supply. Higher employment and a higher money supply lead to increased demand for goods and services. Thus, raising taxes leads to economic growth in this manner.
Impact of Raising Taxes
A direct result of increasing taxes is an increase in government funds. Governments will experience better fiscal stability and contribute more to economic stability and growth. Increased taxes will also lead to improved availability and accessibility of government services. All of these effects create a synergy that ensures a stable and growing economy. On the other hand, higher taxes also increase the financial pressure on taxpayers. This condition leads to possible difficulties of individuals and households in making ends meet. Therefore, reforms to raise taxes must consider these positive and negative consequences to ensure optimal effect on people and the economy.
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