Unit 2 : Income distribution

Income

a flow of fonds referring to amount of money, benefits, other transfers of value over a set period of time by individuals or entitities

the more income, the greater the capacity for building wealth over time

elements making up icnome

private income, pensions and benefits, direct and inderict taxes, indirect benefits

factors explaining why there is wealth and income inequality

personal traits,

other factors (sickness/involuntary unemployment),

occupational conditions (education, training, work responsibility),

opportunity (socio-economic and family background)

direct v.s. indirect taxes

direct: collected from the taxpayers income and paid directly to the government e.g. income tax

indirect: collected from consumer spending (higher prices passed on by the business, who then pays it to the gov’t e.g. GST and excise duty

criteria to evaluate a tax system

fair- people on the same income should pay the same tax

simple

efficient- collected easily

types of public spending

direct transfer: payment made without the production of goods taking place a.g. pension and welfare benefit. used to provide direct income support to weaker groups, and social security/welfare accounts for most of commonwealth spending.