Income Redistribution Set to Increase Under Obama’s Budget

June 25, 2009

New analysis of President Obama’s Budget finds that he is targeting the nation’s highest earners for greater income redistributions. By 2012, the federal government is scheduled to be redistributing an extra $79 billion from the top-earning 5 percent of American families, and $71 billion of that will be paid by the top-earning 1 percent of families.

That’s an additional $64,000 per family redistributed from the top-earning 1 percent, on top of the $368,000 that would have been redistributed from each family even without Obama’s new policies. Part of that change is higher taxes, and part is lower spending on items that benefit high-income people.

The new study, “How Much Does President Obama’s Budget Redistribute Income?,” by Tax Foundation Senior Economist Gerald Prante and Chief Economist Patrick Fleenor, is the first in a projected series of reports based on the Tax Foundation’s “fiscal incidence” model, a computer simulation of the U.S. fiscal system with an innovation: it measures the redistributive effects of both spending and tax policies.

Thanks to numerous studies of tax laws by the Congressional Budget Office, the Joint Tax Committee and others, policymakers are well aware of how much money the tax system by itself redistributes from high- to middle- and low-income Americans. Now the Tax Foundation is measuring the redistributive effects of spending as well.

Read the news release. Read the new Tax Foundation Special Report (PDF).

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