The definition for income distribution is "The distribution of wages earned across a company, industry, or country. Income distribution reveals what percentage of individuals are at various wage levels, information that can reveal more about overall wage patterns than average income can." This means that if a economy has large amount of people with a extremely low income and only a few with a extremely high income the distribution of income is negative, because it is unequal to a high extreme. Although, it is said that every economy needs some income inequality because if there was none then everyone would be earning the same amount and no one would strive to earn more, there would be no goal for people to work harder. "The majority of social scientists believe that income inequality currently poses a problem for American society with Alan Greenspan stating it to be a "very disturbing trend." In the United States income inequality has risen since the 1970's.
Taxes are compulsory financial contributions imposed by a government to raise revenue. There are direct taxes and indirect taxes; direct taxes are levied directly on an individual or organization, such as income tax while indirect taxes are levied on goods or services such as value added tax or exercise duties. As the definition says taxes are mostly used to raise revenue of governments, but governments can have other reasons for taxation, too.
Market failure can be corrected with taxation and efficiency can be increased – governments can impose a tax on unhealthy products such as cigarettes to increase the health of their workers that then can work longer, pollution can be controlled by imposing a pollution tax and people might read more if the VAT is removed from books.
The economy as a whole can be influenced just as well. Inflation, unemployment and the balance of payments can be managed by governments by increasing or decreasing taxation. ... Read more »
According to Oxford dictionary taxation
is defined as: "a compulsory contribution to state
revenue, levied by the government on workers' income and business
profits, or added to the cost of some goods, services , and
transactions"
The reasons for taxation can be for a
number of reasons, however it usually is due to these four reason:
-
To pay for government expenditure. Governments need money to cover
their expenditure programs. They can borrow money but usually it
comes from taxation as this is more effective, doesn't result in the
country being in debt and it can decrease the inflation rate. - To
correct market failure such as externalities.
To correct market failure governments
can intervene by changing the tax of products and thus changing
demand. They could do this for many different pro
... Read more »
