Money for Everyone by Torry Malcolm

Author:Torry, Malcolm [Torry, Malcolm]
Language: eng
Format: epub
Tags: Business & Economics, Economics, Macroeconomics, Political Science, Public Policy, Social Services & Welfare, General, Social Science, Poverty & Homelessness
ISBN: 9781447311256
Google: OEUbAgAAQBAJ
Publisher: Policy Press
Published: 2013-06-27T03:31:28+00:00

Should we redistribute income?

Perhaps a prior question should be: Can we redistribute income? As Income Tax rates rise, tax revenue plateaus (because each hour of employment is now worth less, and additional free time might therefore be preferred), so there is a limit to the amount of redistribution that is possible. A limit is also imposed by the connection between inequality and social mobility. Social mobility can reduce inequality by enabling people earning less to earn more; but unfortunately, the greater the inequality in a country, the less social mobility there will be.450 A further limit is political: Loss of income will be of interest to wealthier members of society, and wealthier members of society also tend to be more influential politically. There will therefore be political limits to the range of possible redistributions.451 There would appear to be no self-righting tendencies within inequality, but only tendencies that exacerbate the situation: which means that redistribution of income, wealth, or opportunities, will need to be by purposeful policy change, and will rarely happen of its own accord. In this section we shall assume that we are working within a range of redistribution options which are feasible in relation to these constraints.

So far we have not answered the question as to whether or not we should redistribute income through tax and benefits systems. Do we do it because we share convictions about liberty, equality, fraternity, justice, or human rights? Because the poor have sufficient power to extract money from the rich? Because the social consequences of not redistributing income are too awful to contemplate? Because a religious or ethical tradition still informs our social policy? Or for all of these reasons? The differences that people experience in earning power are as much a matter of chance as of moral effort, and the same sum of money added to the net income of a poorer person is likely to increase their welfare more than that sum’s loss will reduce the welfare of the wealthier person from whom it has been redistributed. We might or might not count this as a good reason for redistributing income.452

Any tax and benefits structure does redistribute income, and in a variety of ways. Redistribution from rich to poor or from poor to rich is ‘vertical’ redistribution; redistribution between differently constituted households receiving the same earned income is ‘horizontal’ redistribution ( – it is important to evaluate reform proposals for their effects on such horizontal redistribution); and redistribution across the lifecycle is precisely that: we tend to be net recipients when we are young and when we are old, and net contributors during the years in between.453 This chapter concentrates on vertical redistribution, which is not to say that other types are not important; and we start with a discussion of the notion of justice.

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