NCPA - National Center for Policy Analysis


March 27, 2007

Far from "favoring the rich," as many believe, our tax code is massively redistributionist, sending literally trillions of dollars into low-income homes and far less into wealthy homes.  This may be good or bad, depending on your point of view, but the fact is it's happening.  And those who argue that recent tax cuts "benefit the rich" ignore the reality, says Investor's Business Daily (IBD).

A new study by the Tax Foundation shows the extent of the redistribution:

  • The lowest-earning one-fifth of households, it says, get about $8.21 in total government spending for each dollar of taxes paid. 
  • Households deemed "middle income" get $1.30 in return for every dollar sent to Washington; the rich get back 40 cents.

Looking at both taxes and spending in a representative year -- 2004 -- the study found an estimated $1.03 trillion to $1.53 trillion was "redistributed downward" from the two highest-earning income quintiles.  That's a lot of redistribution, says IBD.

  • Today, some 44 million Americans pay no taxes at all.
  • Meanwhile, the upper 5 percent of all income earners in 2004 paid 57.13 percent of all taxes, up from 35.01 percent in 1980.

In other words, the U.S. tax code is becoming more progressive, not less, says IBD.

Source: Editorial, "Who Really Pays?" Investor's Business Daily, March 26, 2007; based upon: Scott A. Hodge, Gerald Prante and Andrew Chamberlain, "Who Pays America's Tax Burden, and Who Gets the Most Government Spending?" Tax Foundation, Special Report No. 151, March 26, 2007.

For report:


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