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In the so-called "fair" models of peer-to-peer wealth exchanges, economic inequality tends to reach its maximum value asymptotically. This global trend becomes apparent as the wealthiest individuals continuously accumulate a greater share of wealth at the expense of others. To combat this rising inequality, various tax and redistribution strategies are commonly implemented.
Our study explores the interaction between wealth and trade (consumption) tax bases, examining their effects on wealth distribution in wealth-conservative economies. The ultimate goal is to identify an optimal framework that effectively reduces inequality.
Through a detailed analysis of different tax rates and the targeted allocation of collected taxes to the most economically vulnerable groups, we reveal a compelling pattern that resembles two distinct phases. These phases outline the most effective systems for mitigating inequality. Our findings highlight the synergistic potential of combining these tax systems, surpassing the effectiveness of each when applied independently. This approach suggests that policymakers should integrate tax rates and targeted redistribution strategies to create tax systems capable of achieving substantial and meaningful reductions in economic disparity.