Direct taxes

Personal income taxes: A portion of income Corporate income taxes: Business profits are taxed Wealth taxes: Property or inheritance taxes

Indirect Taxes

Indirect taxes are regressive, since the taxed portion take up a smaller portion of the wealthy people’s income.

• General expenditure,
• Excise taxes
• Tariffs.

Principles of taxing

Proportional: some fraction is taxed Progressive: The higher the income, the higher the tax Regressive: As income increases, fraction of income paid as tax decreases.

Evaluation

We already know inequality is bad for an economy. So it follows that taxes should be progressive. However, the downside is progressive taxes discourage spending and innovation. Some argue we should just tax the super wealthy.

Investing in creating equal opportunity

Health care, education, affirmative action. Transfer payments are government taxes that are spent on those in extreme need. These have worked pretty well. Spending on merit goods is also good.

Universal basic income

Provide residents in a country with a sum of money regardless of circumstance.

Pros

Reduces poverty, grants economic stability

Cons

Expensive, those who do not need it receive it. Lose incentive to work. Universal Basic Income RWE

Minimum wage

Minimum Wage RWE seems to work well.