20 Percent of Welfare Spending Goes to the Households Taxed To Fund It

About one in every five dollars that passes through the federal welfare system ends up right back where it started, according to a new report.

It’s not robbing Peter to pay Paul. It’s more like “robbing Peter to pay Peter,” wrote the report’s author, Judge Glock, director of research at the Manhattan Institute.

As the federal welfare state has grown to a point where many middle-class and even some upper-income households receive benefits, it has become more common for the same households to both pay federal taxes and collect federal transfer payments. Glock’s paper shows how significant that overlap is: About 20 percent of the annual funds in the federal welfare system are simply returned to households that paid that amount in federal taxes.

And if you don’t count households that are receiving Social Security—the largest federal welfare program, even though it is rarely identified as such—the percentage of welfare payments canceled out by taxes within the same year is 29 percent, Glock’s research shows.

Seems like those individuals and families would be better off simply not paying so much in taxes in the first place.

“Such a system of taxing and returning the same amount of money is a pure waste,” Glock wrote, “since both the taxes and transfers limit households’ options, and there is a bureaucratic cost to circulating income from households to the government and back to households.”

Economically, those transfers and taxes simply cancel each other out and households are left—on a balance sheet, at least—no worse off than if the money had never been taken by the government and then returned.

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