Income redistribution

• contrast between rich and poor is unacceptable →

task of the government = ensure social justice through income redistribution policies

• economic benefits =

make the rich pay more → receipts to the poor

→ resources used almost entirely for consumption

→ more consumption after redistribution (=> more production)

• The government cannot eliminate inequality through an income redistribution policy, but it can make it smaller.

• the government has instruments for redistribution, the most important and most used -> 1) personal income tax and 2) social security

1) Personal income tax

• families earn different incomes →(interest and dividends)

→ (houses and lands)

→ professional income from work

→ other incomes

declaration form on paper or online → after checking, the taxes are calculated

• different tax systems

• proportional tax system: every taxpayer pays the same tax rate

• progressive tax system: higher taxable income = higher tax rate

  → global progressive: full income at the rate of the highest tax bracket

  → stepped progressive tax system: everyone has the same rate on the same part of their income

PROGRESSIVE TAX SYSTEM = REDISTRIBUTIVE

2) Social security

The social security system consists of the insurance principle and the solidarity principle

Insurance principle: the following matters are covered against payment of contribution

→ social risks

→ malady

→ disability

→ anility

solidarity principle: possible payment to those who need it through a certain contribution

solidarity between → employed and unemployed people

→ young people and the elderly

→ healthy and sick people

→ families with and without children

2.1 two types of benefits

1. replacement income = loss of income from work due to unemployment, retirement and disability

2. additional income = additional costs, raising children, medical expenses, ...

2.2 social security service has 7 branches

1. unemployment insurance

2. retirement

3. occupational health insurance

4. family contribution

5. sickness and disability insurance

6. occupational accident insurance

7. yearly holiday

the national social security office is the government agency that collects employee and employer contributions and distributes them among the branches.