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How can budgetary policy be used to reduce inequalities of income? Explain with your opinions.

How can budgetary policy be used to reduce inequalities of income? Explain with your opinions.
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Budgetary policy is used to reduce inequalities of income by redistribution of income and wealth. The key instrument used by the government for redistribution of income and wealth in an economy is "Taxation and subsidies". Taxes are imposed on higher income groups and distributes this as subsidies to lower income groups.

"Taxation and subsidies", is also know as taxation and expenditure. In this, income of rich people is taxed to use that money for benefiting poor people. So, the purchasing power is transferred from rich to poor. This policy is used in this way by the government to redistribute the income.

in my opinion, this policy works well, taxation collets money from higher income groups and this money when given as subsidies to poor people, the income from higher income groups is passed to lower income groups. This reduces the inequalities of income in an economy.

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