Impact of Poverty on Society - Research Paper Example

? Poverty Introduction Poverty is the shortage of the basic things a person needs, such as food, clothing, and shelter. Nowadays, majority of individuals are haunted by poverty across the globe and not much has been done to eradicate it. A great amount of human suffering has been generated by global poverty. In addition to that, it has been unmatched by some tragedies in remote or recent times. For instance, the number of individuals who have died due to poverty is quite amazing. This creates the need to study poverty with the aim of finding possible solutions to eradicate it (Caranti, 2010). The global poverty empirical analysis is far from reaching a consensus on remedies and causes of poverty. Nevertheless, as a consequence, philosophers are extremely divided with regard to who might be held responsible for poverty (individuals or groups). Humanity has been privileged to solve various problems such as finding cure for the insidious illnesses and extracting energy from diverse sources. However, they are unable or unwilling to find solutions to the greatest problem (poverty). The termination of the 20th century was characterized by a commitment by several countries to eradicate poverty. The same period was marked by success in the achievement of price stability. Credit was given to the Central Bank as a result of its adoption of new technologies in the conduction of monetary policies. Currently, some central banks have adopted inflation targeting. With this strategy at hand, the rate of interest is the principal tool used by the central banks in their endeavor to implement monetary policy (Helder & Jose, 2007). Impact of Poverty on the Society The impacts of poverty are closely related, so that a single problem seldom occurs on its own. For example, poor sanitation triggers new and old diseases, whilst lack of adequate water and hunger make people continue living in poverty. Communities and societies that are impoverished mostly suffer from discrimination. As a result, they are prawn to poverty cycles. It results in lifelong troubles and handicaps that are transferred from generation to generation – for instance, lack of school education, lack of basic hygiene, and disease transmission (Jones, 2003). Poverty results in extremely low incomes and unemployment – for example, creates the environment where children cannot simply attend school. For those individuals who have the privilege of attending school, they don’t perceive how their hard work can improve their lives. This is because their parents do not improve on their everyday tasks despite their efforts. Sociological readings have also proved that the impacts of poverty are always transferred from generation to generation. Routine, family values, and living standards leave a minute room for an individual to develop. The enduring need to provide for shelter and food has made individuals to forget other duties such as providing their children with satisfactory life through education. The impacts of poverty are similar, as they do not satisfy an individual need satisfactorily. People living in poverty are often unwell and emaciated, and due to this their lives become shorter. The normal impacts of poverty are lack of opportunities, physical and mental aliments, addiction and drug abuse, increased rates of crime, woman and child abuse, homelessness, education deprivation, and debt pressures. Economic Policy Solution to the Problem To find solutions to poverty, individuals should come up with a strategy that aids those people who are poor for purposes of getting them out of poverty and eliminating conditions that enable them to remain in poverty. The policy and strategies should take into consideration the holistic assessment of issues that contribute to an individual wellbeing, such as health care and financial services. Global poverty is the most challenging problem that can be addressed by organizational scholarships. A variety of issues related to poverty have been discussed at the World Economic Forums. Coming up with an economic policy solution to poverty eradication is essential. An example of such a solution is coming up with a tax policy. Taxes have an impact related to income. Whereas majority of individuals conceive taxes as a way of reducing their income, unfairly or fairly, for families and low income individuals, tax policy can become a tool that is constructive for increasing income. Effective use of tax policies can lift people and keep them out of poverty. They involve tax credits expansion for purposes of reaching more individuals in poverty and more resources investment in policies. This, consequently, helps individuals with low income to build their wealth. In addition to that, a fair tax code beneficial to each and every individual can be used in creating wealth as opposed to concentrating it. Income is an avenue to a life that is poverty free. The money earned by individuals not only aids them in meeting their daily lives necessities but also helps them in building wealth. Wealth takes many forms – from savings to a business owned by families to investments. As individuals’ wealth expands, their likelihood of becoming poor or their poverty declines. Thus, increasing the levels of income and wealth are principal means of eradicating poverty. The use of tax policy can help in achieving the above statement. Apart from policy creation, some interventions such as value framework creation, economic sustained growth building, strengthening of financial systems and international monetary systems, employment creation, poverty eradication, social welfare improvement, mitigating and managing global risks, global security and sustainability ensuring, and building of institutions that are effective in a society that is empowered can help in solving poverty issues. Elimination of poverty should aim or begin with an endeavor that is directed towards explaining to proving each man, child, and woman what is essential for human improvement and welfare. Essential issues are health care, education, sufficient shelter, nourishment, and sanitation. A person’s attention should be directed to those individuals that are defenseless in the society, such as the aged, the women, and the children. However, no single available policy will eradicate poverty. On the contrary, eliminating poverty requires an individual commitment to a variety of complimentary changes to policy. This is where setting of goals can greatly help. Therefore, goal setting with a deadline will trigger an individual to consider actions rather than indulge in debates that are theoretical. Finally, having an overall poverty progress provides individuals with the flexibility of fighting poverty and with an approach that addresses more than one front (Hills, 2003). Discuss how economic theory predicts the policy would work According to economic theories, tax policy plays a major role in the development of the economy of any country (Gordon & Wei, 2009). However, proper measures have to be taken to ensure that there is fairness in the whole process of taxation. Such measures include activities such as selection of effective tax instruments, putting in place proper tax rates, and installation of appropriate methods of tax exemptions and assignments to the government. For a taxation system to be termed as good, it has to be fair to the entire population through the principle of equity. Moreover, it has to employ the use of resources efficiently and also be easy in its administration (Bird, Jorge, & Benno, 2008). Poor tax policies, on the other hand, have been found to be the major contributors to underdevelopment and poverty. Taxation is closely linked to economic growth, which, consequently, has positive results as regards poverty. The nature of taxation shapes growth by determining the growth rate. Positive results concerning the growth rate can only be achieved through cultivating business income tax in order to reserve its function in an unstable economic environment (Gordon & Wei, 2009). This can only be achieved through broadening the tax base and adjusting and streamlining preferential tax systems such as incentives. Systems need to be put in place, which will simplify the formalization process of the private enterprises. This will encourage private businesses to operate formally, widening the tax base. Nevertheless, studies have revealed that the VAT system is more likely to bring frustrations rather than benefits if not administered well. Thus, proper methods such as exemption of small enterprises from VAT regime requirements should be implemented. Governance plays a vital role in the taxation process, since it is the major determinant of the system of taxation. Bird, Jorge, & Benno (2008) explain that taxation policies are set by the government and in many cases it is found that tax reforms are underpinned by political factors. Promotion of good governance systems that are accountable and transparent is important in tax reforms and administration. The process of reforms calls for negotiations from both the government and the citizens. The government should not undermine citizens in this process, since they are the major contributors to the tax system. Government accountability incorporates all the arms of government in tax matters so as to ensure its management coherence (Gordon & Wei, 2009). For this to happen, agents concerned with checks and equilibriums like audit firms have to come into play. Global trends are major determinants of tax systems in many countries, since they are directly connected to the economy (Gordon & Wei, 2009). In the contemporary societies, trade is being globalized and liberalized among economies, affecting tax revenues. Before the liberalization of trade, cross-border trade generated a lot of tax revenues. However, with trade liberalization, governments have to seek alternative ways of tax generation, such as mobilization of domestic revenue. On the other hand, trade globalization promotes foreign investment, which is then accompanied by competition. Due to this, governments are forced to reduce both corporate and statutory taxes in order to attract foreign investment. Bird, Jorge, & Benno (2008) assert that these global trends, if not studied properly so that proper tax reforms are implemented, may cause countries to encounter economic drawbacks. The taxation process cannot be successful if a proper administration structure is not put in place. An effective tax administration framework exhibits the following characteristics: first, the taxation system has to be administered along carefully selected functional lines such as the taxpayer, audit, and arrears unit. Furthermore, the administration operational capacity should be strengthened to detect such things as late tax payments. Also, it should employ the use of advanced technology in order to promote efficiency (Bird, Jorge, & Benno, 2008). This process of administration requires the use of strategic planning where proper and better ways of tax administration are identified in advance. These ways are later adopted into the administration process so as to promote performance in that field. Discuss How the Economic Policy You Propose Would Impact the Market or Solve the Problem Having understood what needs to be put in place in order for the taxation policy to work in reducing poverty, it is then easier to evaluate its market effect (Bird, Jorge, & Benno, 2008). Taxes are the main contributors to the economic growth, since they influence entrepreneurship, investment, and savings incentives. Proper tax systems will not hinder the private investors from formalizing their businesses in order for them to also benefit from the incentives in the formal sector. This will positively impact the economy of a country as well as its subsequent poverty levels by raising its GDP. Unfortunately, many countries that are still sailing in poverty do not understand ways to upgrade their tax systems, so many entrepreneurs operate illegally or informally (Gordon & Wei, 2009). Aid dependency contributes a very great proportion to the poverty state in many countries. Countries that heavily depend on foreign aid have been found to have poor taxation systems. Bird, Jorge, & Benno (2008) concur this is simply because when countries are fully depended on foreign aid, they overlook the importance of promoting domestic revenues. In addition, such countries may raise their budgets beyond their income capabilities and overlook accountability in expenditure. Consequently, such countries are more likely to extend to foreign borrowings in form of loans, which are then paid back with very high interest rates. On the other side, good taxation systems encourage the generation of domestic revenues, which in turn promotes a country’s economic independence. Effective tax systems are the basis of a good state, as they provide the necessary revenues for governance (Bird, Jorge, & Benno, 2008). If an efficient governing structure is established, it means that such practices as corruption through evasion of paying taxes by the wealthy and powerful will not exist. Widening the rich-poor gap, these people avoid paying taxes at the expense of the poor and the powerless. If equity is achieved in the taxation system, citizens will not constantly be complaining of paying tax. They will take up this responsibility willingly and proudly with the aim of building their state. Such nations will avoid situations of violence, as the citizens feel satisfied with what is being done. Gordon & Wei (2009) assert that political instability and violence are the main causes of underdevelopment and poverty in many nations. Taxes should be geared towards the reduction of the gap between the rich and the poor through fair taxation procedures. A good taxation system should reflect horizontal equity where people who earn equal incomes pay equal taxes (Gordon & Wei, 2009). Vertical equity should also be reflected where the tax burden is felt, depending on the amount of income you earn. In order to attain a taxation system that will contribute largely to national development, human development has to be achieved first. Through this, the amount of income taxes collected from individuals will be high. Nevertheless, taxation can be used to reduce the effect of global warming, which is a hindrance of poverty reduction. This can be done through the imposition of high taxes on the large amounts of greenhouse gases. References Bird, M., Jorge M. and Benno, T. (2008). Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability. Economic Analysis and Policy; 38 (1): 55–71. Caranti, L. (2010). The causes of World poverty: Reflection on Thomas Pogge’s Analysis. Theoria: A Journal of Social and Political Theory. Gordon, R. and Wei L. (2009). Tax Structures in Developing Countries: Many Puzzles and a Possible Explanation. Journal of Public Economics; 93 (7–8): 855–66 Helder, D. M., & Jose, S.F. (2007). Economic transparency and poverty *. Banca Nazionale Del Lavoro Quarterly Review, 60(240), 33-48. Hills, J. (2003). The Blair Government and Child Poverty: An Extra One Percent for Children in the United Kingdom. One Percent for the Kids: New Policies, Brighter Futures for America’s Children. Washington, DC: Brookings Institution. Jones, G. (2003). Poverty and the Limits of Literary Criticism. American Literacy History, 766-789. Read More