Which of the following statements about the redistribution function of the government budget is NOT correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → It is mainly achieved through a greater reliance on indirect taxes.
Redistribution works through transfers and progressive income taxes. Indirect taxes are regressive: they hit all income groups equally, so they do not make the distribution fairer.
Option (1) Progressive income taxation helps to achieve the redistribution objective. — True. Higher incomes pay a higher tax rate.
Option (2) It is mainly achieved through a greater reliance on indirect taxes. — False. Indirect taxes are regressive; redistribution relies on progressive income taxation and transfers.
Option (3) It aims at a distribution of income that is considered ‘fair’ by society. — True. This is the aim of the function.
Option (4) The government affects the personal disposable income of households by making transfers and collecting taxes. — True. This is how the function works.
NCERT (2026-27): “Redistribution Function of Government Budget … The government sector affects the personal disposable income of households by making transfers and collecting taxes. It is through this that the government can change the distribution of income and bring about a distribution that is considered ‘fair’ by society. This is the redistribution function.” “5.1.2 Classification of Receipts … The redistribution objective is sought to be achieved through progressive income taxation, in which higher the income, higher is the tax rate. …” “Deficit Reduction: … In India, the government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are regressive in nature – they impact all income groups equally). …” |