Discuss Whether the Most Effective Way to Have Income and Wealth Equality Is to Tax Income More Progressively.

Topics: Tax, Income tax, Progressive tax Pages: 3 (1106 words) Published: March 5, 2013
Discuss whether the most effective way to have income and wealth equality is to tax income more progressively. Income is a stable flow of money, often a salary, which someone works for but this can also be made through interest on savings. This flow of money is often very unequal from person to person due to wage differentials, this then creates inequality. Wealth on the other hand is a stock of assets which have a market value, which may change over time e.g. houses or cars. These are often inherited but can be bought by someone through their income. Wealth and income often found together however someone who is wealthy doesn’t always have a large income. Their relationship with inequality is also very different with a lot more inequality found in wealth as a fifth of wealth is concentrated among the richest one per cent of households however there is still some in income.

One way the government can stop this inequality is through a progressive taxation system that aims to tax the poorest people very little but make the money up by taxing the richer. This would work at several boundaries with someone income being taxed higher when it exceeds a certain limit. This then creates equality as the richer people have less money and the poorer have more from not paying tax and then the unemployed get benefits. This then reduces the budget deficit as the tax payers pay for people benefits, helping to reduce the class system. However one problem with this is that it may cause the highest earners to leave the country to avoid paying tax and companies moving their headquarters abroad where they will pay less tax. This happened in the 70s with the rolling stones but is also happening with corporations such Amazon and Costa and this something that may happen more if the richer are taxed too much. This is also taking money out of the economy as they spend their money abroad, out of the flow of income in the UK. Another problem with this system is that it creates ‘the poverty...
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