Fiscal Policy Effects on Income Inequality in the United States

Abstract

Purpose: The aim of the study was to assess the fiscal policy effects on income inequality in the United States. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Research on fiscal policy's impact on income inequality in the United States underscores several key points. Progressive taxation, coupled with social welfare programs, helps redistribute wealth from higher-income groups to lower-income ones, mitigating inequality. Investments in education and job training improve individuals' earning potential and upward mobility. Minimum wage increases benefit low-wage workers, narrowing income gaps. Government spending on public services promotes equal access to opportunities. However, tax policies favoring the wealthy may exacerbate inequality. Overall, well-designed fiscal policies are crucial for addressing income inequality, contingent on effective implementation and economic conditions. Implications to Theory, Practice and Policy: Redistribution theory, public choice theory and neoclassical growth theory may be use to anchor future studies on assessing the fiscal policy effects on income inequality in the United States. Policymakers should prioritize the implementation of rigorous impact evaluations to assess the effectiveness of fiscal policies in reducing income inequality. Policymakers should prioritize progressive taxation reforms to ensure that the burden of taxation is distributed equitably across income groups.