Question

In: Finance

300 word post In recent decades, the difference between the income going to the richest and...

300 word post

In recent decades, the difference between the income going to the richest and poorest segments of the US population has been increasing.  

Since 1979, the after-tax income of the top 1% has increased by more than 250% while those among the bottom 20% have only seen an 11% increase. (Source: Statistical Abstract of the United States, 2010)

Does it matter if some groups have seen their income increase more rapidly than others?

Should the government impose higher taxes on the top 1% to try to shrink the "gap?"

Why or why not?

Solutions

Expert Solution

This is a huge problem in many countries. The gap between the riches and poor are increasing rapidly. The problem in the developing countries is more severe. The index which measure the income gap between across the population is called GINI Index. The higher GINI index refers to greater inequality among the population. The gini index of the US has increased to 0.49 from 0.43 in 1990. This means that inequality is increasing in US.

This is a important concern for the government as if the income of a part of the population is not increasing at the average rate than that means there is a potentila that this will increase poverty and will affect the public health, education and overall development. Government should focus to frame such policies that help to reduce the inequality. Inposing tax on the super rich and helping the poor can be short term measure but in the long term, it is important to provide opportunites to the low income group to earn more and bridge the gap.


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