Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991-2004
Written by: Gerald Prante and Andrew Chamberlain ABSTRACT While the U.S. tax system is progressive, the distribution of government spending makes the overall fiscal system more progressive than is apparent from tax distributions alone. Using a microdata model we estimate the distribution of federal, state and local taxes and spending between 1991 and 2004. We find households in the lowest quintile of income received roughly $8.21 in federal, state and…
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This is a thought provoking article which brings to the fore a common error in tax policy discussions: arguments based on gross tax burdens rather than net tax burdens. To the extent tax-financed government spending generates benefits, those benefits should be considered as well as tax costs. For example, when discussing the distributive effects of taxes, the benefit of redistributions should be considered when judging the merit of a tax policy.