Income Vs Redistribution

Since redistribution seeks to give the less affluent an economic boost in the form of benefits that have no saleable value, the government is tasked with determining how to pay for these benefits since they have limited resources from which to pull from. The government’s efforts at redistributing includes taxation with the imposition of higher taxes on the wealthy in an effort to provide benefits to those less fortunate distributed in the form of transfer payments (earned income credits, Medicaid, unemployment benefits, SNAP, TANF and SSI). This leads to the creation of wedges between earning and income with the more affluent (being taxed the most) not getting everything they have earned and the less affluent (transfer recipients) not earning everything they receive resulting in less income to redistribute. The result of which is described as what Arthur Okun refers to as the “leaky bucket” of redistribution – as more income is redistributed through taxes and transfer, more income is lost (spilled) due to earning disincentives and other inefficiencies of tax and transfer. (Belkin, p.15). Some earning spill over from both ends so there is less overall earnings without redistribution. At some point we need to find the point where it doesn’t make financial sense to continue, there has to be constrain on the amount of income you can carry from one group to the …show more content…
Additionally, transfer programs may create situations in which niches are formed thus allowing individuals or groups to become lobbyists (rent seekers) vying for the transfers payments for their