NCPA - National Center for Policy Analysis

How Much Does The Government Redistribute Income?

May 24, 2001

Much of the debate in Washington over reducing taxes revolves around how much tax relief will go to higher income taxpayers compared to those with lower incomes. But every year the federal budget takes an enormous amount of income from one group of Americans and gives it to other groups.

According to data from the Joint Committee on Taxation (JCT) and the Census Bureau, 47.5 percent of taxpayers and nonfilers in fiscal year (FY) 2001 had adjusted gross incomes of $30,000 or less and paid only 5.4 percent of federal income, payroll and excise taxes, or $95 billion.

  • If Americans making $30,000 or less receive all of the federal means-tested entitlement spending ($248 billion) and 47.5 percent of all other spending ($756 billion), then the share of total federal spending they received is equal to $1 trillion, or almost 55 percent of all federal spending.
  • At the other end of the income distribution, the richest one percent of taxpayers with incomes over $340,000 pay 22.6 percent of federal taxes (including 35 percent of federal income taxes) or $396 billion -- yet their share of all other federal spending is just one percent or $16 billion.

This means that the share of federal spending going to taxpayers with incomes below $30,000 is nearly 10 times what they pay in taxes while the share of federal taxes paid by the richest one percent is over 23 times their share of federal spending.

Source: D. Mark Wilson, "Budget Equity Demands Across the Board Tax Relief," Heritage Foundation Supplement, May 21, 2001, Heritage Foundation.


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