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Does redistribution of income reduce or destroy incentives for people to work hard?

Does redistribution of income reduce or destroy incentives for people to work hard?

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Answer #1

In a way yes. This is the reason why companies and salaried individuals usually bat for reduction in taxes. High taxes disincentivize firms and individuals to work harder as it means that they would have lower disposable income. This is also why political parties also bat for reduction of taxes while campaigning for elections as this is one very important factor that sways elections.

Redistribution policies are taken up to reduce the inequality in a country however, hardly any countries have actually recorded any decrease in income inequality. As a result, such policies are really questionable when on one hand it reduces the efficiency and incentives for working and on the other hand no real evidence can be seen of reduction in income inequality due to redistribution policies.

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