Greg Mankiw found the latest numbers from the Congressional Budget Office both “illuminating” and “surprising” because they showed that “the effective tax rate is negative for the middle quintile.” The implication was that the middle-class had joined the ranks of those getting more than they contribute, that is, the tax-and-transfer moochers.
Actually, all the CBO numbers demonstrate is that the federal tax and transfer system is mildly progressive. As readers can see in the chart above (which is based on numbers from the same table—supplemental table 7— whence Mankiw obtained his numbers), while the average incomes after taxes and transfers for the first three quintiles is higher than their market incomes, the incomes after taxes and transfers for the top two quintiles are slightly lower.*
And Nancy Folbre does a good job dismantling, step by step, Team Republican’s moocher argument. Here’s her conclusion:
Stepping back from these particulars, the larger point is that most government transfers take the form of social insurance against risks related to health, unemployment and poverty. As with private insurance, people shouldn’t expect the premiums they pay to equal the benefits they receive. What they should expect — and appreciate — is reduced risk of an economic shock that could turn their lives upside down.
It follows that people who receive more in government benefits than they paid in taxes are not moochers. Those who break or bend eligibility rules for private gain are — along with those who evade their taxes or shelter their income in offshore bank accounts set up for the express purpose of minimizing their tax liability.
*Plus there’s the additional issue, which Mankiw notes in an update, that “the CBO’s transfer data includes state and local transfers, but the tax data includes only federal taxes. If state and local taxes were included, or if state and local transfers were excluded, the middle quintile might well turn positive, though the CBO does not provide the data to establish that conclusion definitively.”
Sounds like sloppy work on Mankiw’s part……
Prof.
Prof. Folbre’s article reminded me of a conversation I had with a workmate (who’s actually not a bad fellow, by the way, but watches too much commercial TV).
We were discussing the increasing gap between the pensioners’ and the unemployment allowances. So, I told him that the party in power increased the pensioners’ allowance while keeping the unemployment allowance low, as a way of gaining the pensioners’ over, while demonizing the unemployed.
He said: Oh, But they [the pensioners] deserve it.
I asked why don’t the unemployed deserve it?
The guy seemed to stop to think for a little while and after trying to find something good to reply, he seemed to give up and only came up with this answer: Oh well, they can always work cash-in-hand.
So, I asked him, the solution you propose is for the unemployed to break the law?
To make the situation more absurd, the guy, just like me, is not only a low-income earner; he, also like me, was born overseas.
And the same people who go around demonizing dole recipients, also demonize foreigners…