Adaptive Fiscal Policy and Equitable Taxation as Instruments for Inclusive and Sustainable Economic Recovery

Abstract

Fiscal policy plays a crucial role in maintaining economic resilience and promoting recovery through three main mechanisms: social support, fiscal incentives, and structural reform. Within the context of fiscal constraints, tax efficiency and equity serve as the foundation for sustainable development. Taxes, in addition to being the primary source of government revenue, function as an instrument of redistribution to reduce income inequality. Redistributive fiscal policy, implemented through a progressive tax system and targeted social spending, helps balance wealth distribution and enhance the welfare of low-income groups. The concept of optimal taxation emphasizes the equilibrium between economic efficiency and social equity to achieve maximum social welfare. This study examines the role of fiscal policy and taxation in economic recovery and inequality reduction through a narrative approach based on recent literature. The analysis reveals that adaptive fiscal policy and an equitable taxation system contribute significantly to inclusive and sustainable economic growth, reinforcing the importance of fiscal governance in achieving long-term stability.