Question

Tax on income or tax on commodities; which of the two affects the rich more and which affects the poor more? explain with reasons.​

Answer 1

There are two types of taxes - progressive and regressive. Progressive taxation such as income tax and corporate tax are progressive because they result in equitable distribution of income and therefore reduce economic inequalities. The regressive taxes such as sales tax and other consumption taxes impose burden on the entire society including the poor and therefore regressive. The famed neo-liberalism has a great tax policy - Socialism for the rich and capitalism for the poor. They offer corporate tax cuts in the name of spurring growth, give bail outs to corporations stating that they are ‘too big to fail’. When an ordinary mortal defaults he/she is prosecuted just because he/she is ‘too small to default’.

Answer 2

The most important objective of taxation is to raise required revenues to meet expendi­tures. Apart from raising revenue, taxes are considered as instruments of control and regulation with the aim of influencing the pattern of consumption, production and distribution. Taxes thus affect an economy in various ways, although the effects of taxes may not necessarily be good. There are same bad effects of taxes too.