How is direct tax used to reduce inequality in income and wealth?

● Direct tax is a tax that is levied immediately on the income or property of the people.

● For example income tax and corporate tax.

● The impact and incidence of the tax fall on the same person.

● The government can influence the distribution of income by imposing a higher rate of taxes on the richer section of the society and the lower level on the comparatively poor section of the society.

● This is called an example of a progressive Income Tax system.

● The government collects the money from the rich and spends it on the Welfare of the poor.

● It helps to reduce the amount of money held with the rich and improve the living standard of the poor.