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April 24, 2018 / C H Thompson

Redistribution of Wealth

In order to address the inequalities in wealth successive governments introduce policies which attempt to redistribute wealth and incomes:

  • redistribution of wealth is the transfer of wealth and income from one individual or group to another individual or group by means of a social mechanisms such as:
  • social welfare benefits – payments paid by the state to needy members of society
  • income tax – tax paid on earned or unearned income
  • inheritance tax – a tax paid when people give gifts of wealth
  • capital gains tax – a tax paid when gaining significantly from the sale of an asset

Despite government policies redistributing wealth has been largely unsuccessful because:

  • failure to claim welfare – people fail to claim welfare benefits which are due to them
  • tax evasion – is an illegal activity – people do not declare their income or wealth. This ranges from an electrician being paid in cash and ‘pocketing’ the money without declaring it, to the rich ‘hiding’ their wealth abroad
  • tax avoidance – is a legal activity – people, mainly the wealthy, employing accountants to find legal ways of avoiding paying tax and therefore redistribute their wealth
  • tax relief – where the amount of income tax a person pays is reduced. This occurs when people pay money into their pension or make charitable donations. The more a person pays in to these areas the greater their tax relief which is why the rich have the most to gain from tax relief
  • tax cuts – In 1971 the top rate of income tax on earned income was 75%. The top rate of income tax was cut to 40% in the 1988 budget by Mrs Thatcher. In 2010 the Labour government created a new 50% tax band in 2010 for anyone with income of more than £150,000, but the coalition cut it to 45% in April 2013.



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