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HomeHomework HelpeconomicsTax Policy and Inequality

Tax Policy and Inequality

The 'Impact of Tax Policy on Income Inequality' refers to the effects that government taxation strategies have on the distribution of income among individuals and households, influencing the gap between the wealthy and the less affluent in society. This relationship examines how different tax structures, rates, and exemptions can either exacerbate or mitigate disparities in economic resources.

intermediate
3 hours
Economics
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Overview

Tax policy plays a crucial role in shaping income inequality within a society. By determining how much individuals and corporations pay in taxes, these policies can either mitigate or exacerbate disparities in wealth. Progressive tax systems, where higher earners pay a larger percentage, tend to red...

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Key Terms

Progressive Taxation
A tax system where the tax rate increases as the taxable amount increases.

Example: Higher earners pay a larger percentage of their income in taxes.

Regressive Taxation
A tax system where the tax rate decreases as the taxable amount increases.

Example: Sales taxes that take a larger percentage of income from low earners.

Tax Credit
An amount that taxpayers can subtract directly from the taxes they owe.

Example: The Earned Income Tax Credit helps low-income workers.

Income Inequality
The unequal distribution of income within a population.

Example: The gap between the rich and the poor in a country.

Wealth Distribution
How wealth is distributed among individuals in a society.

Example: The top 1% owning a significant portion of national wealth.

Tax Deductions
Expenses that can be subtracted from gross income to reduce taxable income.

Example: Mortgage interest payments can be deducted from taxable income.

Related Topics

Wealth Distribution
Study of how wealth is allocated among individuals and groups in society.
intermediate
Fiscal Policy
Government policies regarding taxation and spending to influence the economy.
intermediate
Social Justice
Exploration of fairness and equality in society, including economic disparities.
advanced
Global Taxation
Examination of tax systems and policies across different countries.
advanced

Key Concepts

Progressive TaxationRegressive TaxationTax CreditsWealth Distribution