Question

One important task for the government is to redistribute income. Explain, why (some) redistribution could be a good idea, and why (too much) redistribution could be a bad idea. Remember to contextualize, define, exemplify, and illustrate relevant concepts – if you wish, you can include data for any country to support your analyses.

Answer 1

Income Redistribution is an economic practice which is aimed at leveling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor.

Governments adopt economic policies and strategies like progressive taxation to implement this phenomenon

Advantages of Redistribution of income are as follow

1)The advantages of redistributing income is that the society will advance towards equity.

2)This prevents social disharmony that may occur if redistribution is not done and the lower level of income suffers from taxation.

3)Social disharmony can trigger many things such as rise crime rates which will raise the need to invest in security and safety of citizens by training more police officers, build more stations, .

4)Also, the equal distribution of income may be a macroeconomic goal for the nation thus reaching the goal will lead to positive effects on the economy.

5) Pure income redistribution policies generate less future growth than those policies that expand the economic opportunities of poor people to reduce poverty immediately

Disadvantages are

1) If the government raised the money in taxes, then the people paying the taxes have less money to spend in the exact amount that is going to be handed out

2)If the money is borrowed from people,then  The person lending the money now either doesn’t spend the money or cannot save the money. When money is saved, banks lend it out.

3) If the government borrowed the money from abroad. This could work, as long as the money otherwise would not have appeared in the U.S. economy.