Should the government increase tax rates on everyone as a way to equalize incomes and wealth?

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justaguide's profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted on

As the question is about the use of taxation as a means to bring more equality in income and wealth it would not be possible to do that by a uniform increase in the tax rates for everyone. The present slabs for the percent of income that has to be paid as tax makes use of an increasing rate of income tax. People with an income in the lowest slab pay only 10% of their income as tax while those with an income lying in the uppermost slab pay 35% of their income as tax.

If the government's intention is to transfer wealth from those that earn the most to those that live in poverty, the tax rates for the lower income slabs should be decreased and that for higher income slabs increased. There can also be a change made in the income slabs themselves so that a lower rate applies for a higher income level.

Taxation though is not merely a means of wealth transfer, it provides the government with the resources to function and help the society progress and the economy grow. This makes the taxation policy that is adopted very complex in nature.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

This is as much a political question as it is an economic one.  It depends on what you think the ideal society would look like.

The major issue is whether we should want to make incomes more equal or we should want to increase the incomes of those with less money, even if the rich continue to get richer.  If all we want is more equality, then we can certainly raise taxes (though we should be sure to raise taxes more on the rich than on the middle class and poor) to take more money away from the rich people.  However, it is not clear that this is wise and/or sustainable, especially in a globalized world where money might then flow out of our country to places with lower taxes.  Instead, it seems to me that we ought to be trying to make sure that incomes of the poor and middle class rise in absolute terms.  Raising taxes is not the best way to do this.


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