question_answer

Tax rates on higher income group have been increased. Which economic value does it reflect? Explain.

Answer:

Increasing the tax rate on higher income groups leads to an increase in the tax revenue of the government without hurting the tax group. The government can intern use the revenue thus, generated from this taxation to finance the welfare activities in the nation. Thus, by increasing the tax rate on the higher income groups, the government can bridge the gap between the rich and the poor, thereby moving the society towards being an egalitarian society. Moreover, the government can reallocate resources to maintain a balance between the social objectives of welfare maximization and economic objective of profit maximization.

Thus, we can say that by increasing the tax rate on higher income groups, the government satisfies the value of equality and welfare.