We're Already Past the Makers/Takers Tipping Point

A blog about business and economics.
Sept. 20 2012 11:04 AM

We're Already Past the Makers/Takers Tipping Point

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One reason the "47 percent" talking point has gained purchase on the right is that a number that's close-to-but-just-below 50 percent plays well to the idea that the country is near some kind of tipping point. Vote for Barack Obama and we might go over the 50 percent line and become primarily a nation of takers.

The problem is that if you consider all taxes paid and benefits received, the Tax Foundation finds that we've already tipped.

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But it's worth saying that this isn't because the American tax-and-transfer system is hugely redistributive. The underlying issue is that market income has a lower bound of $0 per year. Consequently, the income distribution naturally has a rightward skew in which the mean income is higher than the median. Under the circumstances you'd have to try really hard to create a system in which most people were paying more in taxes than they're receiving in benefits. Even a flat tax with a personal exemption would strongly militate in the direction of takers outnumbering makers. The most likely way of getting around the problem would be for the government to waste a lot of money on public services that are costly but have little value to citizens. That way you could turn the existence of the public sector into a raw deal for most people. But that would be a strange policy objective.

So I think conservatives ought to calm down about this. Conversely (and I'd like to argue this at greater length later) liberals ought to chill out a bit about tax progressivity. Any kind of tax on market income is pretty progressive in its impact as long as you spend the money on something that's useful to people. Making sure that there's enough money for public services and that money is spent in cost-effective ways is much more important than soaking the rich to a greater or lesser extent.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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