Discuss how a goverment might use taxation to affect the distribution of income

Taxes are taken from the citizens (e.g. in the UK, its 20% of a person's income) to help the democratic government function by investing such money on

-infrastructure (transport network, housing, roads)-tertiary (services: elderly homes, transport)

-insurance (medical, healthcare, insurance->car etc.)

However, those with higher income would indefinitely have access to better healthcare, schooling and in a role in increasing the capital. The greatest obstacle for any government is to tackle poverty and underdeveloped countries.

NOTE: The role of government in the distribution of income in today’s economies is relegated to the collection of taxes and the provision of public goods and servicesFirstly, there are the types of taxes to take in consideration.

-Direct Taxation - paid directly to govt. (cannot be dodged)

-Indirect Taxation - tax via retail (businesses, services)

-Proportional Taxation - percentage of tax is constant (often used in developing govt. as it helps the poor increase their capita through generations)

-Regressive Taxation - there is a decrease in percentage of tax as the income increases

-Progressive Taxation - increase in tax, as income increases (most developed countries opt to this)

As a result, different taxations (mentioned above) are used. Some of the tax is used to improve the quality of life of people, instead on relying on money but some countries (such as Communist nations) use taxation to distribute income equally - yet this would not at all work in a capitalised economy. Taxation is predominantly used to share the money as much as possible to the general public to improve the presence and living of its citizens.

Knowledge of a 9th grader (so expect a few mistakes here and there).

Extra resource:http://welkerswikinomics.com/blog/2010/05/18/the-role-of-taxes-in-income-re-distribution-another-pre...

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