Explain two policies governments might use to redistribute income.

A government can use a progressive tax system to redistribute income. The way this works is that as income rises, you pay a higher portion of that income in taxes. This is probably the most common way to redistribute. It also holds that below a certain threshold, no tax is paid at all. Governments also use tax revenues to spend on for example merit goods. These are goods which the government deem necessary for all people’s and so access should not depend on income. It could be health care, education, sanitation, water and electricity. Usually these types of goods and services are provided for free or heavily subsidised.