Question

3. Do you think using we should use taxation as a redistribution tool in a country?

4. Explain how the government can use fiscal policy for capital formation in the process of economic development.

Answer 1

As per policy we have to answer first question

Answer-3) In the recent years the inequality has increased in both developing and developed nations. In my opinion the taxation as a redistribution tool can help to reduce the growing inequality of wealth and income. The redistribution of taxes especially the personal income tax can act as the primary instrument for income redistribution. A progressive income tax may lower the social inequality as impose a lower rate on low-income earners and higher rate on higher income earners. Moreover as the progressive taxes increase when the income of a person increases thus helps control spending and acts as automatic stabilizers because automatically when income of people rises, their spending will be limited because of the increased tax rate