Fiscal Policy, Wealth and Income Distribution

Since the fiscal reforms from the mid 80’s the fiscal policy is less re-distributive. The generosity of the social benefits and the progressivity in taxes is less each time, especially in developed economies. The objectives have moved towards fiscal balance, the dispersion of the risks caused by the volatility of exchange rates and the macroeconomic stability. In brief: the “fiscal consolidation”, understood as the pursuit of budget equilibrium through the reduction of the tax elusion and evasion; the reduction of public expenditure destined to social welfare; the increase in the degression on the income taxes; the reducing unproductive expenditures and the focalization of the programs and resources to fight poverty.

Consensus establishes that fiscal policy is the main instrument to improve income distribution; however, few are the works that focus on the evaluation of how such policy can also generate greater inequality in the distribution of income, wealth and economic and political power, not only between persons but also between companies and industries. The process of economic globalization and international financial instability have accelerated this phenomenon, and imposing to the governments straitjackets that prevent achieving economic and social objectives of the welfare.

Behind all, underlying structural change policies that have changed the legal frameworks and institutions in favor of elites.

The purpose of this document is to establish briefly how the positive effects of income distribution of fiscal policy have been declining in OECD countries and especially in Mexico, and, contrary to expectations, have favored social inequality and economic exclusion of broad sectors of the population. To check, use the database of the OECD by statistical analysis using variables such as fiscal cost, participation in total revenues by type of tax, industry and economic agents, when the available information permits.

 

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See more of: State Intervention and Public Policy
See more of: E: Industrial Relations and the Political Economy

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