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Chapter 15: Q. 40 (page 378)

To reduce income inequality, should the marginal tax rates on the top 1% be increased?

Short Answer

Expert verified

Yes.

Step by step solution

01

Step1. Introduction

Income inequality refers to the gap and the divide between the rich and the poor. It is measured in terms of the differences in the income of rich and the poor sections of the society.

02

Step2. Explanation

The measure of tax increase on the top 1% is a good policy decision to reduce income inequality.

When tax rates are increased for a section of population, the purchasing power of the income of that section falls down.

If a marginal tax rate is imposed on top 1% section, it would reduce their income power, thus leading to a step in the direction of curbing income inequality.

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Most popular questions from this chapter

Explain what the long- and short-term consequences are of not promoting equality or working to reduce poverty.

In country A, the population is 300 million and 50

million people are living below the poverty line. What is the poverty rate?

A group of 10 people have the following annual incomes: \(55,000, \)30,000, \(15,000, \)20,000, \(35,000, \)80,000, \(40,000, \)45,000, \(30,000, \)50,000. Calculate the share of total income each quintile of this income distribution received. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for 2005?

What do you think is more important to focus on when considering inequality: income inequality or wealth inequality?

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