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1 Scott Hodge, Accounting for What Families Pay in Taxes and What They Receive in Government Spending 1 (2009)

handle is hein.taxfoundation/ffbijxz0001 and id is 1 raw text is: OUNDATION
September 2009
No. 189


Accounting for What Families Pay in Taxes and
What They Receive in Government Spending
By Scott Hodge
At their most basic level, budget debates in Washington are about who gets what and who pays
for it. In other words, how do tax and spending policies redistribute income?
Unfortunately, lawmakers tend to consider tax and spending issues in isolation rather than as two
sides of the same coin. And this is very important since the line between tax and spending policy
has become increasingly blurred in recent years as, for example, refundable tax credits have
replaced direct spending programs as the preferred method of aiding low-to-middle income
After enacting tax and spending policies, lawmakers should have a basic understanding of what
might be called a fiscal accounting of the amount of government benefits families receive
compared to what they pay in taxes. This fiscal accounting ensures that tax and spending policies
benefit their intended parties while meeting the broader social standards of fairness.
Until recently, no organization in Washington has ventured to comprehensively measure the
distribution of federal taxes and spending--a technique known as fiscal incidence analysis. The
Tax Foundation's Fiscal Incidence project is stepping forward to fill this void. Our Fiscal
Incidence Model compares the distribution of all federal taxes to the distribution of all federal
spending, calculating how much each family pays in taxes versus how much they get in
government spending-in other words, each family's fiscal accounting. These individual results sum
up into a national accounting of how much tax and spending policies combine to redistribute
income from some Americans to others.
What Is the Current State of Income Redistribution by the Federal Government?
The results of this analysis show that federal tax and spending policies are already very heavily
tilted to the poor and middle-class, even before we consider the Obama administration's budget

Scott Hodge is president of the Tax Foundation.

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