A new report from the Tax Foundation analyzes the degree of redistribution imposed by government. According to the study:
America’s lowest‐earning one‐fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle‐incomes received $1.30 per tax dollar, and America’s highest‐earning households received $0.41. Government spending targeted at the lowest‐earning 60 percent of U.S. households is larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending policy.
This huge shift of resources punishes those who produce and rewards those who do not. This hurts economic performance by distorting incentives. Investor’s Business Daily identifies another problem that may be equally troublesome. Massive amounts of redistribution create an entitlement mentality. People being to think that government owes them a living. And as an editorial from IBD notes, public opinion data are trending in the wrong direction:
…the U.S. tax code is becoming more progressive, not less. No one minds helping the truly needy. But as with welfare in the pre‐1996 reform era, reliance on government can become a habit — imposing huge costs on our national economy. Worse, a ‘what’s in it for me?’ attitude seems increasingly the norm. Once a nation of stoic, self‐reliant individualists, America now seems full of people who think other taxpayers owe them something. They see the ‘system’ as a giant cow to be milked — and damn the cow. This is backed up by polling data. In a 1994 Pew poll, 57% agreed with the statement ‘Government should care for those who can’t care for themselves.’ Today, it’s 69%.