distribution of wealth

Question 1

Define wealth - give examples of wealth.

Answer 1

Ownership or assests - property, shares.

Question 2

Define income - give examples.

Answer 2

Flow of resources recieved by the individual - wages, welfare benefits, pensions.

Question 3

Define disposable income.

Answer 3

Income that a person has left after paying taxes.

Question 4

Define discretionary income.

Answer 4

Income that is left after taxes and all necessary household bills and expenses have been paid.

Question 5

Define marketable wealth - give examples.

Answer 5

Assets that can be brought and sold and turned into cash for the owner’s benefit - private car, a house, and other shares that can be sold.

Question 6

Define non-marketable wealth.

Answer 6

Wealth that cannot be sold or cashed in.

Question 7

Define productive property - give examples.

Answer 7

Wealth which provides an unearned income for its owner - houses which are rented out, factories, land, company shares which provide dividends.

Question 8

Define consumption property - give examples.

Answer 8

Wealth for use by the owner - consumer goods such as fridges - that you own, which do not produce any income.

Question 9

List the 5 ways that the government attempt to redistribute wealth.

Answer 9

1. Income Tax
2. Mansion Tax
3. Social Welfare Benefits
4. Inheritance Tax
5. Capital Gains Tax

Question 10

What is income tax?

Answer 10

Payable on earned and unearned income - generally progressive as it rises as earnings increase.

Question 11

What is mansion tax?

Answer 11

People who own expensive properties could face 1% tax on them.

Question 12

What are social welfare benefits?

Answer 12

From the state, like income support/jobseekers allowance, which are generally seen as an attempt to divert the resources obtained through taxation to the needy sections of society.

Question 13

What is inheritance tax?

Answer 13

Tax payables on gifts of wealth before/after tax - intended to limit inheritance of vast quantities of wealth from one generation to the next.

Question 14

What is capital gains tax?

Answer 14

Intended to reduce profits from dealing in property or shares, and is payable whenever these are sold.

Question 15

List the factors that suggest why there is a failure in the distribution of wealth.

Answer 15

1. Tax Evasion
2. Tax Relief
3. Failure to Claim Benefits
4. Tax Avoidance Schemes

Question 16

Define tax evasion.

Answer 16

An illegal strategy that involves not declaring tax/wealth to income revenues.

Question 17

Define tax relief.

Answer 17

Relief on paying tax for school fees, private pension etc.

Question 18

What is meant by failure to claim benefits?

Answer 18

Applications being too difficult/complicated to complete.

Question 19

What are tax avoidance schemes?

Answer 19

A legal strategy used by accountants/financial advisers - living abroad for a year, spreading wealth within the family etc.

Question 20

What is a strength of the welfare benefits?

Answer 20

They provide for everyone.

Question 21

List 3 other strengths of the distribution of wealth.

Answer 21

1. It’s attempting to be a fair system.
2. It covers a wide range of tax systems and resources, targeting different levels of earners.
3. Income tax - facilitates more resources and services e.g NHS means free healthcare.

Question 22

Why would the highest earners be against most of these initiatives?

Answer 22

They have the most to lose.

Question 23

List 2 other limitation of the distribution of wealth.

Answer 23

1. There is a welfare dependancy amongst certain groups - may drain resources.
2. People still avoid paying tax through evasion - can be difficult to trace.