AS I SEE THINGS: Income and wealth distribution
SINCE THE 2008/2009 global financial and economic crisis, Caribbean and other countries throughout the world have been seeking out strategies to grow and develop their economies along sustainable lines.
This is to ensure, among other things, that people who were adversely by the global downturn would once again be able to gain meaningful employment so they can take care of their basic needs and those of their immediate families.
In some instances, those efforts have produced positive growth results, while in other cases the doom and gloom situation continues.
In as much as it is vitally important for countries to continue to record positive rates of economic growth, it is probably more urgent for the benefits of the growth realised to be distributed in a more equitable manner among the various segments of the populations.
But as is evident in many countries, while the economies are expanding, the inequalities in the distribution of income and wealth are becoming more obvious, leaving some governments to consider ways and means of redistributing those benefits among members of their societies.
The issue of income and wealth redistribution is a key feature of Keynesian economics, reflecting to some extent greater confidence in governments to do the right things as opposed to reliance on markets.
Hence, progressive forms of taxation are usually implemented that result in higher marginal tax rates on those most capable of carrying such burdens. The revenue generated is then used to provide additional benefits to individuals in lower income brackets.
Such taxation policies often come in for harsh criticisms from those who believe that free market enterprises should be allowed to flourish and that individuals in societies must be provided with all the necessary incentives to save and invest in the free market place to stimulate growth, employment and business activities.
While this author has no real difficulties with this kind of argument, it is nonetheless troubling to accept situations in which economies are growing but most of the income and wealth being generated end up in the hands of a few at the expense of the majority.
Under such circumstances governments do have a responsibility to address inequities in income and wealth distribution to ensure that greater benefits accrue to those who make many of the sacrifices to help generate the increased level of economic activity recorded in the country.
In many instances, those in the middle class are the ones who carry most of the burdens when economies are in crisis and are therefore asked to make the majority of the sacrifices to turn the economic tide around. That is so because higher taxes hardly affect low income individuals because they are mostly exempted from paying these taxes.
Since those with high income are usually able to absorb greater taxes, then, they too are not hurt in a significant manner from tax hikes.
Hence, income and wealth redistribution policies can benefit the middle class and should be encouraged by all and sundry when the economic circumstances of the country dictate.
This is indeed good politics and sensible economics. As United States President Barack Obama told the world: “Middle class economics works.” Why not give it a try?
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