Guess who has the largest welfare state?

We often hear how wonderful the welfare state is in various European countries, and their opinions of the United States as a country filled with rich people who don’t “pay their fair share.”

This is quite interesting (from Powerline Blog):

The Daily Chart: Guess Who Has the Largest Welfare State?

 

If you only know two things about progressives today, it is that they are obsessed with income inequality, and have a bad case of envy for Scandinavian socialism, endlessly suggesting Denmark or Sweden should be our model for social welfare policy. But guess which industrial democracy practices the largest redistribution of national income to the lower half of the income scale? Turns out to be . . . the United States.

The y-axis here intimates the all-important calculation of how income inequality in the U.S. diminishes considerably once you account for all of our income transfers and other social welfare spending, which most leftists leave out of their inequality jeremiads. It turns out that while U.S. income tax rates may be lower than European tax rates, in aggregate America’s tax system is more progressive than every European country:

[. . .]

One of the favorite leftist themes is that the U.S. has higher income inequality than Europe because of our (relatively) low income tax rates. But:

[T]he distribution of taxes and transfers does not explain the large gap between Europe and US post-tax inequality levels. Quite the contrary: after accounting for all taxes and transfers, the United States appears to redistribute a greater fraction of its national income to the poorest 50 percent than any European country. This finding stands in sharp contrast with the widespread view that “redistribution,” not “predistribution,” explains why Europe is less unequal than the United States. . . indirect taxes and in-kind transfers are more progressive in the United States than in Europe overall. [Emphasis added.]
The authors also inadvertently embrace several key arguments conservatives typically make:

For example, high top marginal tax rates can limit top earners’ incentives to bargain for higher pay, decreasing pretax inequality. Transfers at the bottom of the distribution can also change incentives to work or acquire skills. [Emphasis added.]
A generous welfare state might be a disincentive to work? Perish the thought. Especially in an academic journal. I can’t believe the peer reviewers let this pass. (For more on this point, see Steve Moore and pals in the NY Post today.)

Much more at link (see above).

 

This entry was posted in Economy, Taxation, Welfare. Bookmark the permalink.

2 Responses to Guess who has the largest welfare state?

  1. Reflection says:

    In the comments below the article there is this statement:

    “There was a time when the United States was the place people wanted to be in order to take advantage of the unfettered opportunity to succeed. Our politicians have changed it to the place where too many people take advantage of other people who must pay for their very existence.”

    It is the effect of a sane and stable immigration policy versus the affects of political pandering. In the former, the individuals and the society benefits. In the latter, exalting the baser motive of greed, the individual and the society are degraded.

    Liked by 1 person

  2. texan59 says:

    This certainly doesn’t fit the narrative. Very interesting. Thanks, Stella.

    Liked by 2 people

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