<< Chapter < Page Chapter >> Page >

Whatever older views might have been, income inequality is not a problem that can be ignored anywhere. Here is the good news. Many nations that have achieved some degree of income redistribution both through the tax side and the expenditure side of the federal budget. But like the Nordic nations since about 1980, they have increasingly achieved this by relying not on the tax side but the expenditure side of the budget, by channeling government spending into growth facilitating human capital formation as programs of direct budget transfers to poorer households. These lessons were widely learned; notably, from 1984 through 2000, nearly 50 nations, from Indonesia, Ghana, Mexico, Estonia, Lithonia to Poland enacted tax reforms involving much simplified, more enforceable taxes imposed at lower , flatter rates, thereby enhancing their capacity for meeting the needs of poorer groups through programs of effective government spending. As one result, by 2013 all nations had lower corporate tax rates than the U.S., where a 35% rate is virtually double the world average.

Rarely mentioned in discussions about inequality in the U.S. is the very large and increasing share of federal taxes paid by the wealthy. In 1979, the top 1% of the income distribution paid but 18% of total income taxes. By 2003, the share paid by the top 1% had climbed to nearly 35%. And, by 2010, according to the Tax Foundation the top 1% earned 19% of gross national income, and paid 38% of all federal taxes. And, by 2013, according to the Economist (September 20, 2014) this group paid 46% of total taxes but largely because of the U.S. Earned Income Tax Credit (EITC), which results in millions of families receiving checks from the Internal Revenue Service, instead of paying income taxes. The top 10% receives 45% of national income and pays 59% of taxes. The bottom 50% pays just 3% of taxes, while 40% of U.S. households pay no income taxes at all, partly because of their income tax exemptions.

Increasingly in tax reform, developing and developed countries have turned to one particular type of low-rate, simplified indirect tax as we will see in Chapter ___. This tax is the value added tax (VAT) a superior type of tax both in raising revenues and avoiding adverse economic effect. Since 1965, nearly 160 nations including Denmark, Sweden, Chile and nearly 20 African nations have adopted this highly feasible tax, including 21 in Sub-Saharan Africa and over a dozen in Latin America.

An overlooked lesson on redistribution and taxes

It is important to understand that countries can impose high rates of personal income tax and still prosper, if they can collect high rates of tax. The empirical record shows that over the years countries can indeed use high tax rates and collect the revenues (with little evasion) but only if the rates are not punitive and the taxes are used to provide services valued by taxpayers, as in Denmark, Sweden, and Norway in the late 20th and early 21st century. To illustrate, in the late 1990s, government spending in Sweden was 68% of GDP. Even after Sweden reduced substantially income and wealth taxes after 2004, government spending supported by taxes was still 52% of GDP in 2012. But the quality and coverage of government-provided public services, especially in pre-university education and health care is quite high relative to say, the U.S. The Swedish tax burden (taxes as a percent of GDP) remains high. Clearly taxes are used to provide public services valued by taxpayers, “The eight-year Itch”, The Economist , September 13, 2014. and taxpayers are not reluctant to pay taxes.

Questions & Answers

Application of nanotechnology in medicine
what is variations in raman spectra for nanomaterials
Jyoti Reply
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
Damian
yes that's correct
Professor
I think
Professor
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
Rafiq
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
Damian
How we are making nano material?
LITNING Reply
what is a peer
LITNING Reply
What is meant by 'nano scale'?
LITNING Reply
What is STMs full form?
LITNING
scanning tunneling microscope
Sahil
how nano science is used for hydrophobicity
Santosh
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
Rafiq
what is differents between GO and RGO?
Mahi
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
Rafiq
if virus is killing to make ARTIFICIAL DNA OF GRAPHENE FOR KILLED THE VIRUS .THIS IS OUR ASSUMPTION
Anam
analytical skills graphene is prepared to kill any type viruses .
Anam
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
Bob
The nanotechnology is as new science, to scale nanometric
brayan
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Damian
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
research.net
kanaga
sciencedirect big data base
Ernesto
Introduction about quantum dots in nanotechnology
Praveena Reply
hi
Loga
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
Bharti
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
Good
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get the best Algebra and trigonometry course in your pocket!





Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Economic development for the 21st century' conversation and receive update notifications?

Ask