If a new tax system encouraged more output but also created greater inequality, would it be...

If a new tax system encouraged more output but also created greater inequality, would it be desirable?

Expert Solution

In my opinion if a new tax system encouraged more output but also created greater inequality, it wouldn't be desirable, unless the increase in output is significantly higher.

The general economic theory is that lowering taxes increases disposable income in the hands of people who in turn use that money to spend either on consumable items, or invest that money to earn profits, thereby increasing economic activities in the country.

However, due to the spread of globalization and capitalist economic system around the world, the main motive for the investors has been to earn more and more profits on their capital. Today, the global inequality is already at its peak. Top one percent of the people in the world own more than 90% of the wealth in the world.

At such glaring inequality prevalent, it may not be the most desirable thing.

Governments across the world should try to find ways to reduce income inequality as well as increase economic growth and opportunities for the underprivileged people.

Rahul Sunny answered 2 years ago

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