income redistribution

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The use of taxation, government spending, and controls to change the distribution of real incomes. Taxation may be more or less progressive. Government spending programmes may be generally available, or may be targeted or means-tested to try to concentrate benefits on the relatively needy. Controls may be used to alter income distribution: for example, rent controls were originally designed to prevent housing shortages from shifting income from tenants to landlords, and minimum wage legislation aims to benefit low-paid workers at the expense of their employers. The extent of income redistribution through the tax system can be measured by comparing the inequality of income distributions before and after tax. The ability of the state to redistribute incomes is limited by the need to avoid too much damage to the incentives to create income by work, savings, and enterprise.

Subjects: Economics.

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