Should governments tax the rich to get out of debt?

A rich idea!

• A number of billionaires have suggested that it is time the wealthy paid their

share of the dues.

• Governments in Europe and the United States are running out of options to plug

gaping deficits and calm jittery markets.

• Billionaire investor Warren Buffett in the New York Times said, “My friends and I

have been coddled long enough by a billionaire-friendly Congress,”

• Here was the third-richest man in the world talking up something everyone could

grasp: taxing the rich.

• In France, Maurice Lévy said it was time France’s wealthiest “participated in the

nation’s effort”.

Types of Taxes

Progressive

Proportional

Regressive

Progressive

• A taxation structure which progressively increases the percentage of a citizen's income (or wealth) which is paid in tax as income (or wealth) increases.

• The consequence should be that the more well off are taxed at a higher rate than are the less well off.

• Supporters of a Progressive tax argue that it would sharply reduce income inequality by raising the taxes on the wealthy.

Salary = $100Tax paid = 10%

Salary = $500,000Tax paid = 35%

Proportional• A tax system in which the tax collected is in constant proportion to

the income being taxed, i.e. as income rises so tax rises proportionately.

• A proportional tax is often referred to as a "flat tax" because every person pays the same percent of their income in taxes. 

Salary = $100Tax paid = 10%

Salary = $500,000Tax paid = 10%

Regressive• A tax structure which requires the more well-off to pay a lower

percentage of their income (or wealth) in tax than a less well-off citizen.

• The consequence is that the more well-off citizen pays a smaller percentage of their income to cover the tax on a new refrigerator than does a less well-off person.

Salary = $50Pays $5 for gas = 10% of income

Salary = $500Pays $5 for gas = 1% of income

Categories of taxes on income in France

1. Corporation tax: Corporation tax is a tax, in principle payable

annually, on all profits generated in France by companies and other

legal entities. It concerns about a third of French companies.

2. Personal income tax: Personal income tax is in principle a

comprehensive tax levied on an individual's total income in a given

year.

Categories of taxes on income in France

3. Social levies : In order to tackle social security funding problems

and ensure that all income helps to finance social protection,

supplementary levies of a tax nature were introduced

4. Payroll taxes :The main payroll taxes are the wage tax, the

apprenticeship tax and employers' contributions to the

development of continuous vocational training and to construction.

Retail sales growth slows as higher payroll tax resumes

Factors that influence total tax revenues

Oil prices & other costs – affect

business profits

Changes in the real incomes of people in

work

The tax base – how many things the

government taxes

Asset prices – e.g. changes in share and

house prices

Rate of economic growth and the rate

of inflation

Level of employment and unemployment

Factors that influence total tax revenues