The revenue from the collection of income taxes not only helps us but also helps the nation. The taxes you pay are what the government uses to build infrastructures, plan more projects, and improve the nation's facilities, such as education, technology, and medical and health systems, to name a few.
What is the effect if the tax rate from income taxes is reduced? The results are both ways: positive and negative.
Let us lay down the pros and cons.
The Pros
The higher the income tax rates, the higher the burden on taxpayers. If the tax rates are reduced, the commitment from the involuntary collection is lighter. Tax rate reduction may increase revenues but only a tiny amount for the short term and may significantly affect both individuals and companies. Private individuals may be encouraged to work harder because they can keep most of their salaries.
It can massively benefit high-income individuals and companies because they may save a significant portion of their earnings. The people can have more money to spend, and they will be less likely to hold and invest for the future.
The Cons
We know that private individuals may think they can benefit more by reducing income tax rates. Higher tax rates can discourage them from working harder. They do not realize that the government relies upon the overall revenue, especially from the collection of income taxes, to fund its expenditures to build and maintain public infrastructures and raise economic growth. And reducing the tax rates on income taxes may result in a national budget deficiency.
The question is: who benefits from the revenue of income taxes?
Every nation benefits from the income taxes of its people. Roads and highways require repair and maintenance regularly, an example of government expenditure. If the government is low on budget, these necessities will likely be compromised.
The mode of good public transport is another benefit of income tax revenue. But due to the reduction of tax rates on income taxes, these public transport may not be as reliable as it is.
If the government is low on funding, it can hinder technological advancements and breakthroughs, especially for health and medical systems and economic growth. The money spent on research and development for the future of the next generation is one of the benefits of the revenue from income taxes. The government's capital investment will likely be spent to cope with the nation's needs and may result in higher debt. To sum it up, reducing tax rates from income taxes cannot assure security for a country.
Conclusion
Therefore, the overall revenue from income taxes may have a positive and negative effect on us. There should be no argument about whether to reduce or reform. We need to consider the weight of these effects. And instead, develop a solution for the betterment of all the people.
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