Reduce Inequality In The United States

Evaluate the impact of polices designed to reduce inequality in countries of your choice. [30 Marks].

Introduction:

There are many causes of Poverty around the world, and different countries all have slightly different policies when dealing with it. Furthermore there are two types of poverty that all countries have to consider. These are called Absolute and Relative Poverty. Absolute Poverty occurs when individuals are not able to consume sufficient necessities to maintain life, such as food/water, clothing and shelter. Relative Poverty is always present in society. The relatively poor are those at the bottom end of the income scale, often those that rely on others for income. A common measure used by many countries is the Gini Coefficient

This means that some people might be living comfortably for themselves but a family might not be able to. A solution to this could be to set taxes on a set of criteria, or to have a standardised tax system where everyone pays 20% (or something similar).

The taxes, based on criteria, could be slightly harder to implement, even though the UK already has a similar system. It would depend on how many criteria and how different it is to the system we have at the moment. The more criteria the harder to implement, but it would also maximise the governments’ revenue from taxes, as it is similar to price discrimination. However many people would have a greater incentive to try tax dodging, which could cause problems for the government, as they would need to hire more staff to deal with the increased workload of tax collection.

The method of a 20% tax means that everyone would pay different amounts on their earnings, but it is easier to enforce. However 20% of some incomes – like those in absolute or relative poverty – might be too large, as it could take away too much of their income, and push them further into

South Africa is an key example of an unequal country that has a progressive income tax system, that raises large amounts of revenue at relatively low cost and with relatively little tax evasion. Company taxes are already a significant share of tax revenue, though there may be scope to increase taxes from mineral rents. There is also scope to raise further the level of taxation on the richest 10%. It is thought that this progressive income tax, has helped lower South Africa’s Gini index, as the distribution becomes more spread, providing the index is taken after taxes have been applied. The revenue from the taxes can be used for benefits for those in absolute or relative poverty, or to improving the education system – so that students stay in education for longer. The benefits and costs of improving the education system come later in the essay. The question is, is the revenue from the taxes used appropriately within South Africa? The answer depends on what we term as