Finance How Tax Can Reduce Inequality

Question: Describe about the Finance for How tax can reduce inequality ? Answer: The table represents the variation of dwellings from the year 1801 to 2013. Fewer dwellings were recorded in the extreme past years, and this has changed over the years. The number has grown gradually from 1,937 in 1801 to 27,151 in 2013. Between the period of 1801 to 1951, the dwelling places were solid (they were not divided into tenure types). The first divisions were recorded in 1951. The tenure types in which the dwellings were divided were two; they could either be occupied by owners or they can be rented. Renting is further divided into three divisions based on the party the dwelling was rented from. These are; private renting, from housing associations and local authorities. However, renting from housing associations started in 1981. There is a rising trend in the change of all dwellings. The trend for dwellings occupied by owners had been rising from 1951 to 2011, but there was a fall in number across the year 2013. The trend for private renting fell from 1951 to 1991, but it has been rising since 2001. There is a rising trend for dwelling rented from housing associations, with the highest increase recorded between 2001 and 2011. This is a 64.65% increase from 2001. There was a rising trend for dwelling rented from local authorities until 1981 when the trend started falling. From 1991, there is a rising trend in owners occupied, private renting, and renting from housing associations, and a falling trend in renting from local authorities. The recorded number of all dwellings in 1961 was an increase of 17.97% from 1951. This is the highest increase of all the periods. The information provided is covering more than two centuries. The change in the total number of all dwellings is greater in the second century (19th century) than in the first (18th century). The highest increase in owners occupied dwellings was between 1981 and 1991. The increase was by 26.97%. The highest increase in private renting was by 91.60% in the period between 2001 and 2011. From 1951, the tenure types remained to be three until 1981 when the 1st record of the 4th type was made. Assignment B Governments decision making is highly influenced by the stimulation of economic growth. During periods of low economic growth, expansionary fiscal policies are implemented by the government. This includes increments in government spending and cutting of taxes. This increases the amount of income available to households. However, since the economy operates in cycles such that at times it can be in an inflationary situation, contractionary fiscal policies are also used. This includes cutting of government spending and raising of taxes. In order to induce some income distribution in an economy, the government sets different taxation rates for individuals with different income groups. Those with a high income are required to pay more in taxes than the low-income class. Their tax rate is way high. There are three classes of tax rates; the high rate for the rich, the lower rate for the middle-income groups and the lowest rate for the low-income group (Congressional Budget Office, 2014). According to Election2015.ifs.org.uk (2015), the working age households with low income and the richest people have lost much through taxation. The rich contributes over three times in tax than what they receive from public spending. Public spending offers the 20 % poorest much benefits of over five times of their contribution in taxes (HM Treasury, 2014). This is referred to progressive taxation which is a tool for income redistribution by the government (Carter and Matthews, n.d.). When making decisions concerning the tax rates to impose to the different groups, the government has to take into consideration some important factor. The goal of the government is the elimination of poverty in the nation, charging higher taxes to the low income would cause them to fall into a poverty trap (Newman and O'Brien, 2011). This is one of the factors that have to be considered. When formulating the optimal income taxation, family size consideration if crucial. The government considers the income of every individual worker and their number of children, while ignoring their productivity (Cremer, Pestieau and Dellis, 2001). The marginal tax rate tends to decrease with the number of kids. However, this marginal rate is zero for parents with income ability. Family allowances and income tax breaks benefits many families with children in many countries. Households, in order to receive the tax credit, are required to report changes in their income and family size (Irs.gov, 2014). During periods of low inflation, cutting of taxes benefits the high-income group more. More money flows to them as compared to the low amounts that flow to the poor. Corporations benefits much from reduced taxation as the public has more income to raise their demand for goods and services raising the profits for the corporations (Infoplease.com, n.d.). Self-evaluation I have got to grips with best the part of describing a table. I require no help with any part, so we can progress with the module. Bibliography Carter, A. and Matthews, S. (n.d.). How tax can reduce inequality - OECD Observer. [Online] Oecdobserver.org. Available at: https://www.oecdobserver.org/news/fullstory.php/aid/3782/How_tax_can_reduce_inequality.html [Accessed 26 Feb. 2016]. Cremer, H., Pestieau, P. and Dellis, A. (2001). Family Size and Optimal Income Taxation. [Online] Available at: https://webdoc.sub.gwdg.de/ebook/serien/e/CORE/dp2001-21.pdf [Accessed 24 Feb. 2016]. Congressional Budget Office, (2014). The Distribution of Household Income and Federal Taxes, 2011. [Online] Available at: https://www.cbo.gov/publication/49440 [Accessed 24 Feb. 2016]. Election2015.ifs.org.uk, (2015). Distributional Analysis - Election 2015 - IFS. [Online] Available at: https://election2015.ifs.org.uk/distributional-analysis [Accessed 24 Feb. 2016]. HM Treasury, (2014). Impact on households: Distributional analysis to accompany Budget 2014. [Online] Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293738/budget_2014_distributional_analysis.pdf [Accessed 24 Feb. 2016]. Infoplease.com, (n.d.). Fiscal Policy and Economic Growth: Government's Unique Situation. [Online] Available at: https://www.infoplease.com/cig/economics/government-unique-situation.html [Accessed 26 Feb. 2016]. Irs.gov, (2014). Changes in Circumstances can affect your Premium Tax Credit. [Online] Available at: https://www.irs.gov/Affordable-Care-Act/Changes-in-Circumstances-can-Affect-your-Premium-Tax-Credit [Accessed 24 Feb. 2016]. Newman, K. and O'Brien, R. (2011). Taxing the Poor. Berkeley: University of California Press. OECD, (2012). Income inequality and growth: The role of taxes and transfers. [Online] Available at: https://www.oecd.org/eco/public-finance/49417295.pdf [Accessed 25 Feb. 2016]. OECD (2010), Tax Policy Reform and Economic Growth, Tax Policy Study No 20. Office for National Statistics (2014) Table 102: Dwelling stock by tenure (historical series), Live tables on dwelling stock (including vacants), Office for National Statistics [Online]. Available at https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants (Accessed 23 Feb. 2016).