Question

Although US is the largest economy in the world, some says it is one of the worst income inequal countries among the industrialized countries and Income inequality in US is not improving,

Q) If so, is it a good idea to raise more tax from the wealthy and provide more welfare safety nets to the poor, or increase of minimum wage , or free higher education with Government subsidy?

Answer 1

Introduction:-

Income inequality is a serious problem in the United States as much as it is in the developing counterparts. It basically refers to the difference in the quality of living and the amount of money which is generated by the rich and the poor in a country.

Post 1970's due to the rise of developing economies and because of the fact that they offer cheaper labor and better prices, most companies within the United States are shifting their production bases to other countries such as China and India to ensure that the cost of production is relatively lower.

While this has some advantages for the overall consumer the problem of Income Inequality is hot debated and is true to a certain extent. In countries like India, people might think that their counterparts in the United States are paid more, but that isn't necessarily true.

The difference in prices of goods and commodities in developing countries and the United States of most goods is more of a disadvantage than adding any benefit for the usual workers. Thus is it is relatively correct to say, that in the United States while the rich have benefitted from being able to produce their products at a relatively lower price, the working class has suffered because of reduced employment opportunity.

Q) If so, is it a good idea to raise more tax from the wealthy and provide more welfare safety nets to the poor, or increase of minimum wage, or free higher education with Government subsidy?

Taxation is a policy which most countries adopt so as to enable themselves to spend money for common welfare goals which helps raise the standards of living for all sections of the society.

Recently, the Trump administration implemented policies which have reduced the tax rates and have not gone down well among the working class because it has not resulted in any significant investment or increased the level of jobs but have rather resulted in companies and the rich reinvesting their money in shares.

In my opinion it is vital for the government today, to intervene and implement policies that help in raising educational status of the working population as well as helps in equal distribution of pay.

This is necessarily done by increasing tax limits which already in the country are extremely low when compared to other countries that tax as much as 50% of the income for very nominal income slabs compared to the United States.

This income, once spent on infrastructural development and job generation activities such as free higher education would enable the country to be free from the shackles of inequality as more people would have access to formal jobs and would raise the overall living standards within the country respectively.

Therefore, the conclusion to this case, is that the government must implement policies that aim at equal distribution which is only possible once the overall levels of education in the country can be increased.

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