There has been considerable discussion about the corporate tax system in the U.S. and the IRS’s global reach in the media over the past year. The rash of corporate inversions was the catalyst for the public discussion of...
- Who Pays Taxes and Who Receives Government Spending? An A...
Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991-2004
Working Paper No. 1
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 local government spending for every dollar of taxes paid in 2004, while households in the middle quintile received $1.30, and households in the top quintile received $0.41. Overall, tax payments exceeded government spending received for the top two quintiles of income, resulting in a net fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes and spending appear to have large distributional effects on households, and these effects have grown since 1991. The results suggest tax distributions alone are an inadequate measure of progressivity, and policymakers should examine both tax and spending distributions when judging the overall fairness of policy toward income groups.
Join the Tax Foundation's fight for sound tax policy Go
Tax Policy Blog
The official weblog of the Tax Foundation.
Tax By State
For information on your state, select it from the drop-down menu.
Ask a Tax Expert
Contact information for Tax Foundation policy staff Ask