When economist Nicholas Eberstadt called the country “a nation of takers,” there was significant backlash among those on the left. Even President Obama responded, saying that entitlements “do not make us a nation of takers; they free us to take the risks that make this country great.”
But a new report by the Congressional Budget Office (CBO) reinforces some of the arguments that Eberstadt made.
When calculations are made to subtract the amount received in government transfers from the amount paid in federal taxes, the results are striking.
The bottom three quintiles (lower 60 percent of Americans by income) are “net recipients” according to the data. That means a majority of Americans receive more in government transfers than they pay in taxes. According to analysis by the American Enterprise Institute, “the lowest 60% of American households by income received an average transfer payment of about $10,000 in 2011.”
So where does this money come from? Mostly the top quintile (the richest 20 percent). The average household in the top-fifth of income earners made a net contribution of $46,500 to the government – mostly used to cover the transfers to the other quintiles! Save a small net contribution ($700) from the second-highest income quintile, the richest Americans are singlehandedly funding the government programs for the rest of us.
There’s another way to look at this data, by measuring dollars in government transfers received per dollar of taxes paid.
The lowest quintile, for example, receives $18.20 in government transfers for every dollar paid in federal taxes. The highest quintile, on the other hand, receives only $0.19 in transfers per dollar paid in taxes.
What this means is that the richest Americans shoulder the burden for all government transfers to poorer Americans, while receiving little themselves. Yet, the president still says the rich are not paying their “fair share.”
The point is missed on Paul Krugman as well, who says, “You could argue that we should have raised taxes at the top much more, to lean against the widening of market inequality, and I would agree.”
Another interesting fact reported by John Merline at Investor’s Business Daily is that the top 1 percent of Americans still receive billions of dollars from Social Security and Medicare. Rich families often receive as much in Medicare benefits as poor families. “Yet despite their being caricatured as pawns of the rich, it has been Republicans who’ve pushed to limit or cut off access to these benefit programs to wealthy Americans,” he said.
What’s the problem with this current system of taxation? It relies almost exclusively on the rich to finance the benefits for other Americans, concealing much of the spending by using terms like tax breaks or exemptions.
The CBO reveals that America relies on the rich more than any other country, according to Scott Hodge, an expert from the Tax Foundation. “The U.S. has the most progressive income tax system among industrialized nations,” he says.