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Tuesday, August 23, 2011


Taxpayers and Tax Spenders

Posted: 17 Aug 2011 12:00 AM PDT

By Chuck Rogér

Let’s examine a stunning facet of human nature: When people get something free, they want more of that something even if it means hurting other people.

A recent study conducted by the Mercatus Center finds that “when the tax-price of federally provided benefits is zero, people demand more, even when funded with deficit money.” America’s progressive taxation scheme gives citizens on the low-/non-taxed end “an incentive either to get as much as they can or to avoid as much cost as possible.”

The Mercatus report quotes early nineteenth-century Vice President John C. Calhoun explaining that the federal government is enforcing heavily skewed taxation which

…divide[s] the community into two great classes; one consisting of those who, in reality, pay the taxes, and, of course, bear exclusively the burthen [sic] of supporting the government; and the other, of those who are the recipients of their proceeds, through disbursements, and who are, in fact, supported by the government; or, in fewer words, to divide it into taxpayers and tax consumers.

“Taxpayers and tax cunsumers” characterizes an income redistribution scheme that poses as fair taxation. Larger and larger segments of the American population have consumed more and more as taxpayers have paid in more and more over a twenty-eight-year period. As the top 10 percent of earners went from paying less than half of all individual income taxes in 1979 to paying almost three-quarters in 2007, the bottom 40 percent went from paying about 4 percent to paying not just nothing, but in fact receiving a net flow of wealth from taxpayers, a flow that equated to a negative income tax rate of about 3.5 percent during 2006-2007.

Even more disgusting is another finding in the Mercatus study. The shift of taxation from low to high earners is specifically associated with increases in government spending on the low earners. In other words, in America, money is being systematically moved from earners to non-earners—flat-out income redistribution. The study’s authors quantify:

As the bottom 40 percent has paid less and the top 10 percent has paid more, entitlement spending has increased from 43.2 percent of the budget in 1979 to 58.4 percent in 2007.

Let’s give perspective to this insanity. All the while, as massive income redistribution has been taking place, so have massive federal deficits been building up. Who are the worst presidential culprits? Who has been spending like there’s no tomorrow to make life “fair” for the “victims” of this mean society of ours? The graph below, taken from the Mercatus study and annotated by me, answers the question. No additional words are needed. Let’s let the graph tell the story.

Click graph for more readable version.


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