How can you say that the government budget be helpful in altering distribution of income in an economy?
or
Explain, how the government budget can help in fair distribution of income in the economy?
or
How can budgetary policy be used to reduce inequalities of income?
Even distribution of income, wealth and social welfare is one of the main objective of budgetary policy. The government uses progressive taxation policy to reduce the inequalities of income and wealth in the country. People with higher incomes are levied higher rate of tax and people with lower income are levied lower rate of tax. People with income below a certain limit are not levied any direct tax altogether.
On the other hand, the government spends these tax receipts on granting subsidies and providing other public services such as health and education, to people of lower income groups, thus, the wealth gets redistributed and reduction in inequalities is achieved.