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Y 7

Measures and Programs to reduce inequality

Aside from improving the ogricultural sector, the government can also delve on improving
the business environment by lowering corporote-taxes of new firms, improving business
methods, eliminating red tope, developing infrastructures through improved roads and
transportation across the country, financial liberalizotion through more efficient system and
broader scope of banking/financial activities. These steps encourage investment activities,
making it friendlier for both immigrant and local investors. A developed business environment
will make the Philippines a competitive investment ground, hence, will attract foreign direct
investments and make job opportunities grow. Government aid can do only so much. Households
concerned should also strategize and manage resources responsibly. Households should learn to
be self-sufficient and should not rely solely on government support. The poor should
complement government efforts, by taking the resources provided to them a step further. The
poor has a role too in poverty reduction. They should help themselves and harness the suppofi
given to them. lt is advisable that they strive independently in order for them to climb the social


The principles of horizontal and vertical equity

Policy towards inequality and poverty is influenced by the desire to achieve both horizontal and vertical
equity. Horizontal equity means that, as a guideline for tax and benefits policy; individuals in the same financial
circumstances have the same fundamental ability to pay taxes, and, therefore, should be taxed at the same rate.
The principle of verticolequity suggests that, when individuals are in different circumstances and have
different abilities to pay, they should not be taxed at the same rate.
The UK tax system, like many. tries to achieve both horizontol and vertical equity. lncome tax is calculated
as a o/o of eamings, so as rncome rises, the tax lake rises, meaning that lndividuals earning the same
income will be taxed at the same rate, and those earning more or less will pay more or less tax. The
system also has bands of tax, with a tax-free allowance, so that at very low income, no tax is paid, and at
very high income the upper tax band will apply. Horizontal equality is achieved because everyone pays in
the same tax band pays the same tax. This means that a high earning individual will get the same tax-free
allowance as the low paid, and will pay tax at the same rate as others over the different bands of income.

. lf the private market fails to provide enough jobs to achieve futt employment,
1 the govemment must
become the employer of last resort.
2. When growth is below capacity and the job markei is slack, apply fiscal and monetary policies
aggressively to achieve full employment. This means not raising interest rates pre-emptively and investing
in public infrastructure.
3. Take actions against countries that manage their currencies to subsidize their exports to us and tax our
exports to them. Such actions can include revoking trade privileges, allowing for reciprocal currency
interventions, and tevying duties on subsidized goods.
4. Support sectoral training, apprenticeships, and eam-while-you-learn programs.
5. Raise the minimum wage and raise the overtime salary threshold (beneath which allworkers get
overtime pay)
6. Provide better oversight of financial markets: mandate adequate capital buffers, strengthen the
Consumer Financial Protection Bureau, and encourage vigilant oversight of systemic risk in the banking
7. Amplifo workers' bargaining power avoiding, at the state-level, anti-union, so-called "right-to-work"
laws, encouraging minority unions, and reversing state laws that undermine unions?nd prevent them from
collecting dues for benefits they provide workers at unionized workplaces.