Transcript Redistribution Via the fiscal process

Redistribution Via
the fiscal process
Public Finance 6
Income Distribution In The Protective
State
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The income share of individuals will be determined
by:
The amount of resources owned.
The marginal value product.
This lead to:
Shift resources to into those employment where they
are most productive.
Firms to produce goods at the lowest cost possible.
However, individual are not equal in capacities and
do not confront equal economic opportunity.
Redistribution Through An Idealized
Fiscal Process
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Tax collection reflect coercive withdrawal of
income from person, and spending reflect
provision of benefits to other person in the
economy .
A. Distribution In An Ideally Neutral
Structure When Redistribution As Such
Is Not A Collective Good
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Even in ideally neutral fiscal structure must
embody a scheme of marginal tax
differential.
Redistribution As A genuinely
Collective Good
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Individual concern themselves with the wellbeing of others.
Two ways in which redistribution can be
treated as a collective good:
Transfer payment
Income in kind
Constitutional Redistribution Emergent
From Social Contract
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Redistribution through the fiscal process may be
explained as inherent part of “social contract”.
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This sort of redistribution under four separate
subheadings:
Rawlsian maximin principle of social justice.
Insurance principles in constitutional contact.
Protection against revolution.
Redistribution as the exercise of public property
rights.
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1- Rawlsian maximin principle of
social justice.
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Income and wealth differences are
acceptable only to the extent that such
differences act to benefit the person in the
least advantaged position in social order.
2- Insurance principles in
constitutional contact.
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Individual might in their own self-interest ,
agree on a scheme for fiscal redistribution.
3- Protection against revolution.
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Relies on the self-interest but does not
require the initial uncertainty present in
Insurance principles
4- Redistribution as the exercise of
public property rights.
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All citizens have the right through the
workings of the political process on all
income and assets in the commuinity.
B. Redistribution through Nonidealizsed
and Potentially Observable FiscalPolitical process
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Fiscal redistribution will be aimed to benfit
the members of the ruling coalition along with
its favored constituents.
Public Spending and Equality of
opportunity
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Distinction must be made between measures
to equalize income when earned and those
measured designed to equalize the
opportunity of person to earn income.
Example:
Education and training program.
Redistribution By Nonfiscal Means
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Minimum wage