Content For Mains Enrichment (CME)
Source: LM
The “accordion tax” is a progressive taxation system aimed at redistributing income from the wealthy to the poor while maintaining incentives for innovation and entrepreneurship. It operates by taxing higher-income individuals more heavily, similar to how an accordion expands and contracts.
Example:
In India, the income tax rates increase as the taxable income increases. Individuals with higher incomes are subject to higher tax rates, while those with lower incomes face lower tax rates.
Economic Thinker:
| Economic Thinker | Views |
| Adam Smith | Emphasizes the importance of market forces and individual self-interest in driving economic growth. Argues against excessive government interference in taxation, favouring policies that promote competition and free exchange. |
| John Maynard Keynes | Supports progressive taxation and government intervention to reduce income inequality, aligning with principles of social justice and equitable wealth distribution. |
| Amartya Sen | Argues for a nuanced approach to taxation that considers its impact on social welfare and individual freedoms, emphasizing the importance of balancing redistribution with incentives for innovation and growth. |
| Jagdish Bhagwati | Expresses scepticism towards excessive taxation, warning of potential negative consequences on entrepreneurship and economic growth. Advocates for policies that encourage investment and innovation. |
| Abhijit Banerjee | Supports progressive taxation as a means to address income inequality and promote social welfare, but emphasizes the need for careful implementation to avoid disincentivizing wealth creation and economic dynamism. |
| Raghuram Rajan | Advocates for policies that strike a balance between addressing income inequality and fostering economic growth. Suggests that taxation should be designed to promote fairness while incentivizing productivity and investment. |
