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Redistribution Alters the Share of National Income

1 min readBy: Scott Hodge, Andrew Lundeen

Federal, state, and local policies redistribute $2 trillion in income. Prior to redistribution by government, the top 20 percent of families earned 55 percent of the nation’s income. After government’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and spending policies, these families earned 39.6 percent of the nation’s income.

The opposite occurs for the majority of Americans. The bottom 20 percent of the population earned 3.1 percent of total income in 2012, but redistribution from all government sources increased their incomes by $1.1 trillion, raising their share of the nation’s income to 11.8 percent. Families in the middle quintile also gained income from redistribution. Initially, these middle-income families earned 14 percent of the nation’s income, but redistribution added $297 billion to their incomes and increased their post-redistribution income share to 16.4 percent.

These findings come from our new report, The Distribution of Tax and Spending Policies in the United States. Read more here and here.

For more charts like the one above, see the second edition of our chart book, Putting a Face on America's Tax Returns.