Taxes significantly influence economic inequality through their redistributive effects. Benefits play a crucial role in reducing UK income inequality, accounting for approximately 80% of the reduction when combining cash benefits and direct taxes. Direct taxes contribute around 20% to this decrease. Indirect taxes, predominantly VAT, tend to increase inequality due to their regressive nature, while different countries show varying levels of effectiveness in their tax and benefits systems in reducing inequality [1][2][4][5][10].

How do taxes influence economic inequality?

Fiscal policy and income inequality: the role of taxes and social spending

The effects of taxes and benefits on income inequality

Income inequality before and after taxes: how much do countries redistribute income?

The effect of taxes and benefits on UK inequality

a graph of a graph showing different colored lines

How do taxes influence economic inequality?

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