Income Distribution

1. Taxes—-Money that the government takes out of an individuals earnings. The US employs a progressive income tax, meaning that the rich must pay a higher percentage of their income to the government than the poor.
2. In-kind transfers—-The giving of essential goods or services (or coupons for those goods or services) to the poor.
3. Housing subsidies—-Similar to in-kind transfers, in which the government provides funds earmarked for paying rent to people who cannot afford their own housing.
4. Welfare—-A program in which the government gives money to individuals whose income falls below a certain line.
5. Unemployment benefits—-Money given to those unable to find a job.

In-kind transfers give specific goods or vouchers for goods to low income workers, forcing them to get the specific goods for which they are meant. Welfare generally is a cash transfer that allows the recipient to decide the ultimate use of the benefit. In-kind transfers are more paternalistic, since the government makes consumption decisions for the recipients under the assumption that they won't necessarily make the best decision for themselves.