Fiscal Policy in Relation to Distribution of Income and Wealth

Abstract

The objective of a fiscal policy to redistribute income and wealth is to increase the standard of living of the poorer and their holding of wealth, and to reduce that of the richer so as to achieve greater equality. Much depends on the public's rating of equality and their endorsement of a government's policy for redistribution of income and wealth. A survey by Gallup International Institute (The Economist, September 5, 1992) showed considerable differences in attitude towards equality of people in a number of countries. Asked whether it was the government's responsibility to reduce income differences, 63 per cent of respondents in Britain said yes, 81 per cent in Italy, 64 per cent in Holland, 56 per cent in West Germany and only 28 per cent in the United States. Nevertheless, when it came to electing a government, people tend to vote for political parties that promised lower taxes, even though such a policy could not be expected to have a redistributive effect.