ISL Economics Blog


Main » 2010 » October » 13 » Income Distribution/Taxation.
7:49 PM
Income Distribution/Taxation.
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.

A government can help lower the gap between the income levels by imposing taxes. There are three different kinds of taxes but only two of them are believed to help income inequality. They are both opposite ideas but neither has been set in stone to work better than the other. One tax is a regressive tax, this is an indirect tax, these are taxes that are set on goods or services and the amount of the tax hits people harder depending on the amount of income they make. For example, if a product has a dollar tax on something, this dollar may be more valuable to a person with a low income while it could be very little to a person with a high income.

The other two taxes are taxes that imposed to help income inequality are progressive and proportional taxes. A progressive tax is a direct tax, this means that this tax is imposed on a person's income directly and given to the government. A progressive tax is a tax that raises as a person's income raises. This means that if a persons income is 10,00 a year they will have a lower tax percentage to a person that earns 30,000 a year, because they both fall in separate tax brackets. This could help income inequality because the rich are loosing more money to taxes therefore bringing them closer to the poor. Although the other tax is a proportional tax, this is also a direct tax, this tax is a 'flat tax' meaning that it is the same tax for everyone no matter how large their income. This could help income inequality because people would have more urge to get more money. This in the long-term could possibly help lead to a lower income equality, but that only depends on the attitude of the citizens.

Sweden is a great country to look at for taxes, their tax revenue GDP is 49.2, this is an extremely high number. Although,they seem to get pretty good bank for their buck. They are a country that has a lot of people that are happy and this is because these taxes are used to help everyone's happiness of their lifestyle. This means that the transfer payments are increase for everyone to benefit off of. A few examples of transfer payments in Sweden are childcare benefits and pension benefits.

Sweden's childcare benefits are great, especially the parental leave that is given to both of the parents. The leave that is given to both parents is a joint-leave, unless it is a single parent they get all the days to themselves. The parents get a total of 480 days, 390 of them are paid as much as 80 per cent of their income and the remaining 90 days they receive 180kronor a day. These hours can be divided however the parents choose, although each parent MUST take up a minimum of 60 days. This is great compared to the U.S, where only the parents can take of 12 weeks of a non-paid leave.

The pension system in Sweden depends on the income that a person has made, but if a person did not work enough in their life to qualify for the state pension they receive a minimum of 6,381kronor a month (married) or 7,153kronor (single). You may start to obtain your pension at age 61.

These transfer payments allow people in Sweden to create life and end their own life the most comfortable way possible. People may be against taxes, but in my opinion they are only bad when they are used for war, if these taxes are used for purposes the way Sweden does, it is a great way for the government to keep their economy and country healthy and happy.

Read more:

Views: 409 | Added by: Mphipps | Rating: 0.0/0
Total comments: 0
Only registered users can add comments.
[ Registration | Login ]


IB2 Economics [13]
12th Grade Section
IB1 Economics [11]
11th Grade Section


Login form


«  October 2010  »


Chat Board


Our Poll

How much Zefirs did you buy on the weekend?

Total of answers: 2


Total online: 1
Guests: 1
Users: 0