The Costs of Public Income Redistribution and Private Charity

Most academic participants in the ongoing debate over income redistribution are aware that it is not possible, ever, for government to tax one set of persons and redistribute the same amount to a set of subsidy recipients. Some fraction of each dollar taxed will always be absorbed in wages and salaries of the administrative bureaucracy, costs of purchasing, powering, maintaining and replacing equipment, buildings, etc., and other overhead costs. Only the remainder will actually be received by the target population in the form of cash or in kind payments. Many advocates of compulsory income redistribution have tended to ignore this inconvenient fact altogether in their writings, however. Indeed, most of the public discussion proceeds with an implicit assumption of costless, dollar-for-dollar income transfers.

Volume 21, Number 2 (2007)