Economics: Positive vs. Normative

The United States tax system is our government’s budget, which is used to fund different programs and pay down on the debts that have been acquired by our country. The main word to be taken from that statement is “budget”. Anybody who has had to set a budget knows that one of the most important pieces of information that is needed is the total amount of money that is being contributed to the budget. There are so many variables and loopholes in the tax system which make coming up with an accurate number nearly impossible, and the main people who are able to take advantage of these things are the rich.

Looking at this situation from a positive economical point of view, one would realize how unfair this system actually is. The highest earning twenty percent of our population holds about 50% of the money, while the lowest earning twenty percent holds about 3% of the money. At the same time, households which earn over one million dollars only pay about 14% of their money in taxes, while the families that make about 13,000 a year pay close to 30% of their money in taxes. The biggest loophole for the rich is with dividends and capital gains, which are taxed at less than half of normal income.

The view of how things should be when it comes to the economy is called normative economics. Normative economics says that the poor should pay less, and the rich should pay more. It is only right to pay your fair share. That is how many households work, and should be how the government works, but our government is run like a business, and a business is designed to give most of the profits to only a select few, while everybody else is stuck pulling the weight of those few. The way the tax system currently operates discriminates against the poor so the rich get richer, and the poor get poorer.

In order to make the tax system fairer, each dollar that is in the country should be taxed at the exact same rate. After all, the government has the final word over how businesses can be run, so they are in control of everything. If there was a flat rate tax system at the national level like there is for things like sales tax, property tax, and vehicle registration fees then the system would be more efficient and give our leaders a better idea of the actual health of the economy that they control.

Charging different tax rates based on who is being taxed, and how the money was earned is only one way the government discriminates against the poor. Charging a flat rate tax on every dollar earned is the only fair way to look at this issue. If a business was to charge different prices to different people for something like a gallon of gas, then the owner of that business would surely be brought up on criminal charges. Taking the current tax system into consideration from this point of view, what makes our (elected?) government any different than the type of criminal who charges different rates to their customers? Tax reform will change a lot of things like this, and give our economy a chance to get out of the red, simply because everybody will pay their fair share automatically without being discriminated against.

Presidents get elected based on what they say, not on what they do. This has been proven on hundreds of different situations, and the tax system is a big part of it. Obama said: “If you make more than $1 million a year, you should pay at least the same percentage of your income in taxes as middle class families do. On the other hand, if you make under $250,000 a year – like 98 percent of American families do – your taxes shouldn’t go up. You’re the ones struggling with the rising cost of everything from college tuition to groceries. You’re the ones who deserve a break”. Unfortunately, there have been no actions taken in this direction, nor do there appear to be any plans for actions to be taken. Instead, we get slapped with something like the mandatory health insurance laws, which make the poor even poorer.