Special Report

Countries Where Taxes Most Effectively Close the Income Gap

Income inequality has become a major topic of political discourse all over the world, particularly since the COVID-19 pandemic began. Many governments adopted aggressive stimulus programs to put money into the hands of consumers. The United States Government established the Paycheck Protection Program to give small businesses funds to meet payroll and benefits costs, and adopted the Coronavirus Aid, Relief, and Economic Security, or CARES, Act. The CARES Act was followed by the more ambitious American Rescue Plan Act of 2021.

The pandemic has also renewed debate about universal basic income, under which citizens of a given population get a guaranteed income without a means test. It’s politically polarizing: supporters argue it’s the best way to address income inequality and guarantee everybody a minimum standard of living; opponents rail against big government and raise the issue of moral hazard – people will choose not to work if they don’t have to. (These are the countries with the largest gap between rich and poor.)

In truth, however, governments everywhere redistribute income one way or another, and they typically use tax policy to do so. 24/7 Wall St. has identified the 50 countries using taxes to redistribute the most income, based on data from the World Inequality Database’s 2022 World Inequality Report. 

Click here to see countries using taxes to most effectively redistribute income

Our list demonstrates clearly that countries at all levels of economic development and governments of all political stripes redistribute income. The No. 1 spot is claimed by South Africa, where successive governments have sought to address the legacy of Apartheid, reduce poverty, and lessen social tension. At No. 2 is Denmark, a rich and famously liberal country, with a high degree of social cohesion. (These are the countries where people have the highest average net incomes.)

Close behind are countries as varied as Georgia, a former Soviet republic, and Cuba, which still has a Communist government. At No. 18 is Yemen, one of the world’s poorest countries. One place behind Yemen is the United States.  

Sponsored: Tips for Investing

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.