Redistribution Folly

In FY 2010 the wealthiest 1% of Americans earned 19% of the wealth and paid $335.6 billion (37% of federal income tax revenues) in federal income tax. The bottom 50% earned 13% of the wealth and paid $27.2 billion (3% of federal income tax revenues). This is without a doubt an extreme disparity in both income and taxation.

Federal Revenues As Current (In Billions)

$335.6 + $27.2 = 362.8

What if we let the Liberals have their Socialist way and redistributed the wealth somehow? What if we took just under half the wealth from the top 1%, keeping their effective tax rates the same, and gave it the bottom 50%, allowing their effective tax rates to double?

Thus the top 1% would only hold 10% of the wealth and would pay $159 billion to the federal government and the bottom 50% would hold 22% of the wealth and pay $81.4 billion to the federal government.

Federal Revenues Post-Redistribution (In Billions)

$159 + $81.4 = $240.4

The wealth redistribution, even with taxing the wealth-reduced top 1% at the same level and doubling the taxes upon the enriched lower 50%, results in a $122.4 billion reduction in federal income tax revenues which are 42% of the total federal receipts. That’s a 33.7% shortfall.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

— Winston Churchill

But, Gods damn it, it’d just be so much more fair to redistribute that wealth! Isn’t that fairness and equality of outcome more important than mere federal revenues and the entitlement programs they’re spent upon?

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2 Responses to “Redistribution Folly”

  1. zhann Says:

    Statistics have a funny way of clouding the truth when that is the goal. For starters, I am having a hard time finding information about the richest 1%, but the richest 10% is easy enough. By most of the sites I have found, the richest 10% control 75% of the wealth, and pay 75% of the taxes, which seems fair. If your statistic is correct, which I have no reason to believe otherwise, the richest 1% end up paying the brunt of the taxes for the remaining 9%, which I think they should divide among themselves.

    My ‘socialist’ ideology has a much safer solution to our tax problem … flat tax. No write offs, no deductions, a simple flat tax on earnings. All companies, all employees, everyone needs to pay a flat tax. I now, that is such a socialist mentality, forcing the rich to pay what they owe, but it seems fair.

    Just curious, but aren’t you sick and tired of labeling everyone that disagrees with you a socialist? I for one am a true and true socialist. I dislike Republicans, and equally dislike Democrats. I feel this comic sums up my feelings nicely. However, the majority of Liberals are far from socialists. Do you enjoy being labeled a racist? Its funny, but many liberals take just as much offense to being called a socialist as conservatives do to being called a racist … makes no sense to me, but labels tend to have that effect.

  2. jonolan Says:

    Here’s a breakdown from FactCheck. My research showed slightly different numbers but that is likely do to variances between tax years. Humorously, their numbers were slightly higher than mine. 😀

    You’ve hit a, if not the, nail upon its head. The only way that wealth redistribution doesn’t hurt the government’s revenues is if a flat tax is enacted. A progressive tax system always makes it more economically beneficial for the government for the wealth to be concentrated near top where the tax rates are higher.

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