Fiscal Cliff Its Challenges and Research Paper
- Length: 7 pages
- Sources: 10
- Subject: Economics
- Type: Research Paper
- Paper: #52499293
Excerpt from Research Paper :
S. It too had run into a deep recession and too sought ways out of it by considering tax options. In a similar way, both candidates running for the South Korean presidency in the 2012 presidential elections vowed to "to prioritise "national reconciliation," better "economic democracy" and social welfare" (BBC News (17 December 2012) South Korea's presidential candidates) and to do this via easing South Korea's income gap between rich and poor by adjusting tax burden appropriately. No wonder, that U.S. President Barack Obama congratulated her and stated that he "is looking forward to working closely with her administration on issues of mutual concern" (ibid). The two nations currently have a lot in common and Ms. Park seems to be treading the path that Obama has in mind.
Our recent recession goes by various names. It is called, in turn, the Great Recession, the Lesser Depression, the Long Recession, and the global recession of 2009 (World Economic Outlook, April 2012. April 2012. pp. 38), but it actually started in December 2007 and hit the country in 2008. The global recession affected the entire world economy, with some countries suffering more than others. Obama recently proposed the Fiscal Cliff as partial solution to the Recession and as aid to his Healthcare, but the fiscal cliff may actually aggravate the recession and hinder attempts to climb from it.
Obama's intent has been to counteract the 'trickling effect' implemented in the past that was a result of tax-cuts imposed on the super-rich and introduced by the Clinton / Bush / Reagan / Kennedy administrations. These tax-cuts, rather than profiting the poor, as planned only made the poor poorer and the rich wealthier and swelled the Government coffers.
Obama's intent, therefore, is to raise taxes in various quarters by changes that include introduction of a 2% tax increase for workers, elimination of certain tax breaks for businesses, elevation in the alternative minimum tax, elimination of tax cuts from 2001-2003, and the beginning of taxes associated with Obama's health care law.
However, as this article shows, the super-wealthy will be little touched by these tax cuts (since they are already taxed minimally and make their money from investments, capital gains and dividends; whilst it is the middle class who will be the ones who will largely suffer.
This essay argues that tax rate should be raised for both wealthy and the middle-class, but that it should be raised in different rates for unearned income and earned income. In other words, Government should take into account Grosz's (2012) observations that the super-wealthy do not need to rely on salaries and wages for his income. They should also consider the fact that the Bush administration accorded extremely low tax cuts to that kind of money treating it even more generously than tax incurred from wage income and the Obama administrant should re-adjust their tax hikes accordingly. Only in this way can a fair redistribution of money be made.
Given that the intent of the U.S. parallels that of South Korea at the end of 2010, the U.S. too can learn from the way that South Korea intends to invest its money and follow its example. South Korea aimed to narrow its fiscal deficit; it intended to raise total revenue; boost budget spending in research and development; reduce sales of deficit treasury bonds; and cut spending on infrastructure. The U.S. can allocate its money in a similar way whilst using its revenue too for public welfare/public good to an even greater extent.
Condon, S. (December 19, 2012) the middle-class tax hikes in Obama's "fiscal cliff" plan. CBS News.
Grosz, D. (Dec 19, 2012) Rich Make Out Like Bandits in Fiscal-Cliff Negotiations. The Daily Beast
Kenny, T. What is the Fiscal Cliff? About.com http://bonds.about.com/od/Issues-in-the-News/a/What-Is-the-Fiscal-Cliff.htm
Sperry, P (10/17/20) From JFK to Bush, Treasury Swelled After Tax Cuts. Investors.com http://news.investors.com/ibd-editorials-perspective/101712-629790-data-debunk-deficit-exploding-tax-cuts-myth.htm#ixzz2FXV9iQaL
NY Times (November 29, 2012) Tax Burden for Most Americans Is Lower Than in the 1980s http://www.nytimes.com/2012/11/30/us/most-americans-face-lower-tax-burden-than-in-the-80s.html?pagewanted=2&hp&_r=0
World Economic Outlook, April 2012. Washington, D.C.: International Monetary Fund. April 2012.
The Unofficial Stanford Blog. Warren Buffet has a lower tax rate than his secretary http://tusb.stanford.edu/2007/07/warren_buffet_has_a_lower_tax.html
Heather Stewart (July 21, 2012). "Wealth doesn't trickle down -- it just floods offshore, research reveals." The Guardian.
Galbraith, John Kenneth (February 4, 1982) "Recession Economics." New York Review of Books Volume…