Get Ggd-90-69 Tax Policy. Tax Policy And Administration

The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you're one of the lucky few to earn enough to fall into the 37% bracket, that doesn't mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate.

A system of lump-sum taxation under which some consumers pay positive taxes while others receive subsidies is redistributive: it reduces income inequality if the subsidies are received by low-income consumers and positive taxes are paid by high-income consumers.

The act broadened the income tax base, raised the corporate tax rate from 12 percent to 13.75 percent, and increased the top estate tax rate from 20 percent to 45 percent. The act also imposed a slew of large excise tax increases on items such as cars, tires, radios, and electricity.

Redistributive policies reallocate wealth, property, political or civil rights, or some other valuable item to the advantage of class-based groups (Hill and Leighley, 1992, Jongho and Berry, 2008). While these policies often involve economic decisions, they can also involve the redistribution of social status.

Government redistribution Two other common types of governmental redistribution of income are subsidies and vouchers (such as food stamps or Section-8 housing vouchers). These transfer payment programs are funded through general taxation, but benefit the poor or influential special interest groups and corporations.

Distributive policy collects from the many and benefits the few, whereas regulatory policy focuses costs on one group while benefitting larger society. Redistributive policy shares the wealth and income of some groups with others.

A progressive tax system is valuable, as it substitutes for imperfect insurance and redistributes the gains from trade. However, it also reduces the incentives for labor to reallocate away from comparatively disadvantaged locations.