Reducing Income Inequality through Tax Policies: A Case Study of UK Government

Running head: ADVANCED TAXATION
Advanced Taxation
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Table of Contents
Introduction:...............................................................................................................................2
Normative arguments:................................................................................................................2
Proportion of tax revenue raised by different types of taxes.....................................................5
Tax policies used by UK government to reduce inequality since 1970:....................................7
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

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Introduction:
With increasing inequality among the rich nations it has now become a matter of
concern because it is social, political and economic outcomes. As argued by Solt (2016)
growing concerns of income inequality is not unavoidable but the same can be overturned
through the concrete proposal. The proposal contains a wide ranging span that can extend
beyond the traditional redistributive tools but also comprises of the substantial rise in the
direct redistribution through the income tax and social transfer schemes and increase in the
minimum wages. The paper aims to address the measures of reducing the income inequality
in the society. Furthermore, detailed suggestions are outlined for the UK government to
reduce the income inequality through appropriate tax policy.
Normative arguments:
The rapid expansion of the rising economies over the past decade has successfully
lifted millions out of the absolute poverty and lower disparities in income all through the
world as whole. Meanwhile, before the global financial crisis of 2008, there were several
economies that were expanding as well (Sturm and De Haan 2015). However, inside the
OECD and the rising economies not all the people have gained equal benefit from the growth
periods. In contrast to this, the income distribution among the people become more uneven.
Predictably, especially following the beginning of crisis, the uneven distribution of
income trends has grown the salience of fairness into the political debate in several nations,
both in respect of the opportunity and consequences for consumption and household earnings.
Very few doubt that fairness is considered vital (Steele 2015). However, the understanding of
what constitutes fair differs and may in parts portray the historical trends for income
distribution, that can increasingly differ among countries. With that being said, over the long

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period of time large number of income inequality may be considered unwelcoming to growth
and development.
As argued by (Shariff, Wiwad and Aknin (2016) strengthening the social insurance
would help in building and reinforcing the current structures. Nevertheless, social insurance
might have difficulty in dealing with with the broadly conversed new social risks that are
related to lower pay, uncertain irregular employment and family dissolution. It also poses a
major challenge to the insurance model. Increasing the social insurance rates would create an
impact on those that are entitled to benefits, whereas spreading coverage might not result in
immediate impact if the added entitlements should be built up by added contributions.
In the meanwhile, Neumayer and Plümper (2016) argues that paying basic income to
each people irrespective of the earnings and living situation has been encouraged from the
diverse philosophies and the same is presently being debated seriously in numerous nations.
This would create broader impact instead of strengthening the social insurance and may
provide some advantages in relation to new social risks particularly. Wider coverage signifies
that it might be either very costly or less generous while resulting more important structural
transformation. The relative merits of such alternative on work incentives, in comparison to
more dependence on the means testing also plays a central role in debate.
As stated by Alt and Iversen (2017) inequality are usually less noticeable in the
OECD nations than other parts of the world, despite the fact that in recent decades the
distribution of disposable income has turned out to be more uneven. During the mid-1970s,
the Gini coefficient, whereby 0 being the perfectly equivalent stood relatively at 0.28 amid
the working age people on average basis in the OECD nation. However, by the mid-2000s, it
became highly unequal and rose to 0.31.