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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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