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Income redistribution or redistribution of wealth is a term used to refer to political policies designed to change the wealth distribution within a given society. In the present day, redistribution of wealth is most often used to reduce the level of economic inequality, but this was not always the case, and in principle wealth could be redistributed in a large number of different ways for a wide variety of purposes. The use of the word redistribution implies that there are at least two rounds of wealth distribution: First, an economic system (such as capitalism or socialism) creates a certain distribution of wealth, then the government steps in to redistribute some of that wealth.

Today, income redistribution occurs in some form in most democratic countries, usually through income-adjusted taxes (in which the amount of tax paid is directly connected to one's income), some of which go towards funding welfare programs to assist the poor or society at large.

Proponents of income redistribution point to the fact that capitalism results in an unequal wealth distribution, and argue that such a distribution is unjust; for example the three richest people in the world possess more financial assets than the poorest 10% of the world's population (that is, the poorest 600 million people) combined.^{[citation needed]} They also argue that economic inequality contributes to crime.^{[citation needed]} There is also the issue of equal opportunity, for example in the case of providing education or health care for children, who are unable to pay for such services themselves, and are not responsible for their parents' income. Also the law of diminishing returns is cited, with the interpretation that the loss to the wealthy in the form of taxation is proportionately less than the gain to the poor from social programs. Adam Smith wrote that the cost of government must be borne by those best able to afford it. Finally, it is argued that the rich should pay higher taxes because they receive greater benefits from the protection of the government; they have more property, and therefore more assets for the government to defend. According to a recent survey of 1,000 American economists, the majority favored income redistribution.^[1]

Opponents of income redistribution typically argue that the first round of distribution is fair and thus no redistribution is required. For instance, they may argue that property rights should be paramount over notions of social justice or equality.^{[citation needed]} They may also argue that high incomes are always due to beneficial and efficient economic activity, and therefore redistribution punishes those who deserve their wealth. Public choice theory claims that redistribution tends to benefit those with political clout to set spending priorities more than those in need, who lack real influence on government.^[2] Critics of income redistribution also argue that such measures will result in a brain drain as wealthy individuals leave a redistributive society and take their wealth to a place with lower taxes, thus harming the economy.^{[citation needed]} They also believe that income redistribution creates a dependency culture and a society that is not meritocratic.^{[citation needed]}

Between total rejection of income redistribution and total support for income redistribution, modern societies usually choose some kind of middle path: They decide on the grade of redistribution. Such decisions are typically made by letting different interests compete against each other in democratic elections. The objective of a moderated income redistribution is to avoid what is perceived as the unjust equalization of incomes on one side and unjust extremes of concentration on the other sides.

Decentralized energies (as small scale renewable energies) are more redistributive than centralized ones (as nuclear power and fossil fuels).

There are several ways to measure the redistribution of incomes. As an example, progressive income tax taxes are a widely used method of income redistribution. The difference between the Gini index for an income distribution before taxation and the Gini index after taxation is an indicator for the effects of such a taxation. Other inequality measures^[3] can be used as well.

• Redistribution of wealth
• Middle class
• Progressive taxation
• Robin Hood effect
• Redistribution
• Sabbath economics
• Social equality
• Social security
• Universal health care
• Welfare (financial aid)
• Welfare state

1. ^ Klein, D. B. & Stern, C. (6 December, 2004) Economists' policy views and voting. Public Choice Jounral.. Retrieved on 2007-07-02.
2. ^ Plotnick, Robert (1986) "An Interest Group Model of Direct Income Redistribution", The Review of Economics and Statistics, vol. 68, #4, pp. 594-602.
3. ^ Small calculus of inequality measures and on-line calculator