Social programs, such as Familias en acción and healthcare and education subsidies, have a real impact on reducing inequality in the countries of the region. These topics were addressed during the conference about inequality and fiscal policy. In the picture, Darío Rossignolo.
The Latin American tax and public expenditure system doesn’t contribute to inequality reduction. That was the main conclusion of Ángel Melguizo’s (Ocde), Marcela Meléndez’s (Universidad de los Andes) and Darío Rossignolo’s (Universidad de Buenos Aires) research works presented this Friday, November 11th, in the conference about inequality and fiscal policy, as part of the Lacea Lames meeting, which will take place until this Saturday, November 12th, at Universidad EAFIT with the support of this university and the Colombian Central Bank.
Social transfers in kind do have a real incidence on the reduction of income gaps. In Colombia, they are represented by social programs, such as Familias en acción and Adulto mayor; housing subsidies; and healthcare and education subsidies for families that are part of the System for the Identification of Potential Beneficiaries of Social Programs (Sisben.)
“This country doesn’t work hard to reduce inequality in terms of public expenditure and taxes, but social transfers in kind have a significant impact on it. Besides, if we compare ourselves with other countries, we have the worst landscape and gigantic pending matters,” stated Marcela Meléndez, researcher at the Universidad de los Andes.
Moreover, according to the researcher, in Colombia, rich people pay less taxes than poor people, i.e. there is a regressive tax system, which makes inequality gaps more difficult to close.
In Argentina, social programs such as the universal allocation per child (that grants unemployed people or people whose income is lower than the minimum wage a monthly fee per each child under the age of 18) or the social security inclusion plan (that helps those who don’t meet the requirements to get a pension) show a great impact on people’s final income.
According to Darío Rossignolo’s (Universidad de Buenos Aires) economic research works, these transfers made by the government are the ones that help reduce the Gini coefficient, i.e. they close the gap between the rich and the poor.
Other study presented during the conference analyzed the total amount of taxes paid by the middle class in the region and compared it with the total benefits the government gets. The outcomes show that this population segment, earning between 10 and 50 dollars a day, pays more than what they receive; but the ‘vulnerable’ middle class, earning between 4 and 10 dollars a day, receives more than what they pay.
The researchers’ hypothesis to explain this phenomenon is that, due to its socioeconomic characteristics, middle class people are too rich to access social inclusion programs, but too poor to access accounting advice. Therefore, they end up paying more taxes without receiving social benefits in return.
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