3.3.4—Redistribution policies

Governments redistribute income and wealth through progressive taxes, benefits, pensions, minimum wages, education, health care and other public services.

Policies can reduce inequality and improve opportunity, but may affect incentives, administrative cost, government finances and the distribution between current and future generations.

A progressive income tax combined with targeted benefits can raise the disposable income of low-income households; funding and behavioural responses determine the net effect.

Redistribution is not automatically costless or perfectly targeted; evaluate who pays, who receives and what changes in behaviour.