Income redistribution


Income redistribution

Income redistribution refers to a political policy intended to even the amount of income individuals are permitted to earn.Fact|date=July 2007

The basic premise of the redistribution of income is that money should be distributed to benefit the poorer members of society, and that the rich should be obliged to assist the poor.Fact|date=July 2007 Thus, money should be redistributed from the rich to the poor, creating a more financially egalitarian society.Fact|date=July 2007 Proponents of redistribution often claim that the rich exploit the poor or otherwise gain unfair benefits. Therefore, redistributive practices are justified in order to redress the balance.Fact|date=July 2007

This differs slightly from wealth redistribution or property redistribution, a policy which takes assets from the current owners and gives them to other individuals or groups.

Critics deride it as "theft, put to a vote". [ [http://www.kelsoinstitute.org/needists.html "The ambitious politician naturally favors increased government] ...because of its enormous possibilities for patronage, for 'buying votes,' and for perpetuating a political administration through the economic dependence of constituents...", "Two-Factor Theory: The Economics of Reality", (New York: Vintage Books, Random House, Inc., 1967), pp. 18-24.]

Today, income redistribution occurs in some form in most democratic countries, most commonly through income-adjusted taxes (in which the amount of tax paid is directly connected to one's income), some of which goes to fund welfare programs to assist the poor or to all the society.

Different Views on Redistribition

Arguments for Redistribution

Proponents of income redistribution may point to the fact that capitalism results in an unequal wealth distribution; for example the three richest people in the world possess more financial assets than the poorest 10% of the world's population (that is, the poorest 670 million people) combined.Fact|date=July 2007 They also argue that economic inequality contributes to crime. There is also the issue of equal opportunity, for example in the case of providing education or health care for children, who are unable to pay for such services themselves, and are not responsible for their parents' income. Also the law of diminishing returns is cited, with the interpretation that the loss to the wealthy in the form of taxation is proportionately less than the gain to the poor from social programs. Adam Smith wrote that the cost of government must be borne by those best able to afford it. Finally, it is argued that the rich should pay higher taxes because they receive greater benefits from the protection of the government; they have more property, and therefore more assets for the government to defend. According to a recent survey of 1,000 American economists, the majority of the 264 respondents favored income redistribution.cite web|url=http://springerlink.metapress.com/content/w4q363786573275h/|title=Klein, D. B. & Stern, C. (6 December, 2004) Economists' policy views and voting. "Public Choice Journal".|accessdate=2007-07-02]

Arguments against Redistribution

In the view of opponents to redistribution, the above arguments often overlook the standard of living, which historically rises dramatically with lesser redistributionFact|date=June 2007, while at the same time increasing unequal results. This is due to wealth creation which benefits all areas of society, albeit in a more unequal proportion. Fact|date=June 2007

Public choice theory states that redistribution tends to benefit those with political clout to set spending priorities more than those in need, who lack real influence on government. [Plotnick, Robert (1986) "An Interest Group Model of Direct Income Redistribution", "The Review of Economics and Statistics, vol. 68", #4, pp. 594-602.] Opponents of this theory argue that it punishes good economic activity whilst rewarding poor economic activity, resulting in an inefficient economy, and that it infringes on one's right to enjoy the fruit of one's labor and property rights. Milton Friedman famously argued that the slogan "From each according to his ability, to each according to his need" turns ability into a liability and need into an asset.Fact|date=July 2007 Critics also argue that such measures will result in a brain drain and lead to a state where the middle class have to support a large population of unemployed and working poor with an ever-increasing percentage of their income. They also believe that income redistribution creates a dependency culture and a society that is not meritocratic.

There are numerous examplesFact|date=July 2007 of wealthy individuals and companies leaving a country (and moving their wealth) to others with a less punishing tax system.Fact|date=July 2007 Thus an argument against redistribution is that the wealthy are far more likely to create wealth, jobs and employment and therefore taxation policy should entice them to remain.Fact|date=July 2007

One could also argue that the wealthy do not generally receive more or better governmental services that all share equally. For example the rich do not get preferential treatment at the public library or on the national highways. NASA does not specifically benefit the rich more than the poor, and thus should not be excessively taxed for general benefits to the population as a whole.

Individualist and libertarian ethical arguments consider "redistribution" a euphemism for theft, maintain that it infringes on one's right to enjoy the fruit of one's labor, that concepts such as "fair" and "deserve" are arbitrary excuses for plunder, and that stealing is still stealing regardless of what any group of non-owners may succeed in obtaining via government intermediary, and that consequently redistribution of legitimately obtained property cannot ever be just. [ [http://www.anthonyflood.com/redist4.htm "Redistribution" as Euphemism or, Who Owns What?] " Philosophy Pathways," Number 65, 24 August 2003, by Anthony Flood]

In a recent survey of 1000 economists by the Economist, over 73% did not think income redistribution merited discussion.

Choosing the Intensity of Redistribution

Between total rejection of income redistribution and total support for income redistribution, modern societies chose a third way: They decide on the "grade" of redistribution. Rather than employing ethics, the decisions are made by letting different interests compete against each other in democratic elections. The objective of a moderated income redistribution is to avoid the unjust equalization of incomes on one side and unjust extremes of concentration on the other sides. Both forms of extreme redistribution tend to be implemented violently. Moderated redistributions then allow for a moderated income inequality which fosters a non-violent competition in free markets.

Different Types of Redistribution

Energy Income Redistribution

Decentralized energies (as small scale renewable energies) are more redistributive than centralized ones (as nuclear power and fossil fuels).

Measurement

There are several ways to measure the redistribution of incomes. As an example, progressive income taxes are a widely used method of income redistribution. The difference between the Gini index for an income distribution before taxation and the Gini index after taxation is an indicator for the effects of such a taxation. Other inequality measures [ [http://www.poorcity.richcity.org Small calculus of inequality measures] and on-line calculator] can be used as well.

ee also

* Basic income
* Redistribution of wealth
* Middle class
* Progressive taxation
* Robin Hood effect
* Redistribution
* Sabbath economics
* Social equality
* Social security
* Universal health care
* Welfare (financial aid)
* Welfare state

Footnotes


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