Question

how does direct tax reduce income inequality?​

Answer 1

Explanation:

Progressive taxation has a direct impact on reducing income inequality. Our taxation rates, however, must be based on our own realities. This means that we need empirical evidence of the relationship between progressivity of personal income tax with tax evasion, investment and economic growth within India.

Because high-income households pay a larger share of their income in total federal taxes than low-income households, federal taxes reduce income inequality. But federal taxes have done little to offset increasing income inequality over the past 40 years

Answer 2

A.Because high-income households pay a larger share of their income in total federal taxes than low-income households, federal taxes reduce income inequality. But federal taxes have done little to offset increasing income inequality over the past 40 years.

INCREASING INCOME INEQUALITY

Income inequality has increased sharply over the past 40 years. A simple way to measure inequality is by looking at the share of income received by the highest-income people. Using a broad measure that includes labor, business, and capital income; and government social insurance benefits (such as Social Security, Medicare, and unemployment insurance), the Congressional Budget Office finds that the fifth of the population with the highest income saw their share rise from 46 to 54 percent between 1979 and 2016 (figure 1). This increase in income inequality came about despite the growth in Social Security and Medicare, which boost before-tax income for low- and middle-income households.