From Greg Mankiw’s Blog:
Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received. For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):
Bottom quintile: -301 percent
Second quintile: -42 percent
Middle quintile: -5 percent
Fourth quintile: 10 percent
Highest quintile: 22 percent
Top one percent: 28 percent
The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned.
This is an interesting view of the tax code. Not just what one pays, but more of an income – expenses view. I personally think this is much more telling than just the effective tax rate an individual may or may not pay into the system. I also found this very interesting:
…the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess.
I think that statement might become important later. Especially when we start to frame the middle class as beneficiaries of the state rather than a group paying into it.
Income vs. Market Income
Just in case you were thinking that Mankiw was playing with the definition of income by calling it “Market Income” (I suspected fowl play to adust the statistics) here is a definition:
Market Income: Market income is the sum of earnings (from employment and net self-employment), net investment income, (private) retirement income, and the items under “Other income”. It is equivalent to total income minus government transfers. It is also called income before taxes and transfers.
I have to say, upon further research, using the term Market Income seems pretty water tight.
Thoughts on these findings?