Income Redistribution

Dodge ball is a game where two teams on either side of center line throw a soccer ball at each other, trying to hit a member of the opposite team. In the playing field of political punditry, those on the left and right of the center line throw the epithet of “income redistribution” at the other team, accusing them of this heinous crime.

According to a June 27th, 2008 Gallup Poll “Americans’ lack of support for redistributing wealth to fix the economy spans political parties: Republicans (by 90% to 9%) prefer that the government focus on improving the economy, as do independents (by 85% to 13%) and Democrats (by 77% to 19%). This sentiment also extends across income groups: upper-income Americans prefer that the government focus on improving the economy and jobs by 88% to 10%, concurring with middle-income (83% to 16%) and lower-income (78% to 17%) Americans.”

In their “Currents” feature of 3/10/09, the WSJ reported that “In a recent WSJ/NBC News poll, the highest-ranked peeve, named by 35% of those polled, was bank executives taking large bonuses while receiving taxpayer funds.” This is income redistribution to the rich. However, IRS data shows that the top 25% of income earners paid 86.3% of income taxes, so it is more a case of redistribution of income from some well off people to other very well off people.

Some conservatives rail at Obama’s tax hikes, accusing him of Robin Hood economics and warning of a descent into European socialism. Under Obama’s plan, a person earning $300,000 would pay an additional $1200 in taxes than under the current system. It is a relatively paltry sum hardly deserving the degree of complaint from these conservative critics, but it is true that some of that money would go to lower income earners so this is income redistribution to the poor.

By nature, progressive tax systems are redistributive. A redistribution of a tax burden is a redistribution of income. An overwhelming majority of people do not favor redistributive schemes. It has been almost 100 years that the progressive income tax has been in effect.

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