Mint Primer | Redistribution: Can it benefit India’s poor?

livemint.com:

Mint looks at the concept, the pros and cons of implementing it and the outcomes of past attempts. It is a process by which income and wealth is transferred from the rich to the poor through steps such as taxes, land reforms and welfare measures. This is done to bridge economic inequality in the system.

This subject typically comes to the fore when inequality widens significantly as is the case today. A study by the Organization of Economic Co-operation and Development has revealed that the wealthiest 10% of households hold 52% of the total wealth while the least wealthy 60% hold just 12% across 38 member countries. Economists such as Thomas Piketty have called for greater redistribution of wealth.

The Congress election manifesto promises a nationwide socio-economic and caste census to strengthen affirmative action for bridging inequality. While this statement in itself is benign, speeches of its leaders have hinted at a greater redistribution of wealth. Rahul Gandhi has talked of “historic assignment to distribute wealth of India, jobs and other welfare schemes" post census.

Sam Pitroda has cited inheritance tax as a tool to redistribute wealth. Bharatiya Janata Party has portrayed this idea as an attempt by the Congress Party to grab people’s wealth and redistribute it, especially to minorities. No—it’s already in play.

Those earning more pay higher tax. The tax revenue is used to fund welfare measures, subsidies and direct cash transfers to the needy. State governments levy property tax.

In the past, India had estate duty (a form of inheritance tax), wealth tax and gift tax. They were abolished as the cost of administering them was more than revenue generated. The wealth gap has widened in India in the recent years.