President Biden is expected to announce a plan this week to increase tax for those earning over $400,000 a year. The revenue raised from the tax will be spent on extending Medicare, a federal insurance program for people over 65 or those living with certain disabilities.
By levying the tax increase, the US government can redistribute income from high earners to those who are unable to access healthcare services or pay for their own insurance.
Medicare is in desperate need of funding to avoid insolvency. The proposed tax hike is predicted to raise $700 billion in the next decade, providing much needed cash to continue the program for the next 25 years. This couldn’t come at a more pertinent time, with Medicare in desperate need of funding to avoid insolvency.
THINK LIKE AN ECONOMIST!
Q1. Define income inequality.
Q2. With reference to the article, explain why governments want to redistribute income.
Q3. Evaluate the view that taxing high-income workers is the most effective way to redistribute income in an economy.
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