The Regulation of Income Inequality Based on Tax Policies and Implementations

Income inequality emerges as a pronounced challenge across the globe, influencing the economic, political, and societal dimensions of communities. Meanwhile, taxation is a commonly utilized strategy as a fiscal measure to redistribute income and wealth. This paper examines the mechanism of government tax policies and distinguishes the different influences between direct taxes, with progressive mechanisms including income and wealth taxes, and indirect strategies, such as corporate and consumption taxes with regressive effects. Further case analysis explored the challenges of implementing tax policies, including limitations in design, compliance issues, and a weak balance between economic growth and equity. In addressing such problems, the paper proposes optimizing strategies in emphasizing progressive taxes, targeting tax relief policies on lower-income households, and improving tax administrative strategies with technology and transparency. The importance of the study is in highlighting the need for tax policies to not only mitigate income disparities but also foster a sustainable and developing economic environment.