As we mull the question of the tax compromise, the discussion over proper levels of taxing and spending continue as does the issue of the redistributive nature of such policies. On that theme, it strikes me as worth considering what we mean by “redistribution” as it seems that a lot of people simply think of it in stark terms such as confiscating wealth from the rich and giving it to the poor. However, the concept is a bit more complex than simply issues of welfare policy (or how one views them).
Any public good is one wherein there is almost certainly some amount of redistribution given that it is usually impossible that each citizens pays in the same in taxes as they receive back in benefits. Further, the nature of public good is that it is difficult to divide them into equal shares as some people benefit more from public goods than do others (and at different times). This is easily illustrated by roads—some use them more than others.*
However, without getting into the complex issue of public goods writ large, let’s consider the ways in which redistribution takes place under basic governance apart from just transfers to the poor.
Take public education as an easy example to illustrate what I am talking about: Three families live on the same block in the same neighborhood in houses of roughly the same value and therefore pay roughly the same in property taxes. One family has three children, another has one and the other has none. Now, all three families receive the general public good of living in a society with a literate citizenry and the likewise the businesses/organizations** have access to an educated population. However, there is little doubt that the families with children receive more direct benefits from the public schools than does the family sans kids and, further, one family received three times the benefit of the one with only one child. This is, by definition, shared costs by all involved that redound more to one sets of citizens than it does to others.
Consider another example: a small, walled city-state needs to hire night watchmen to guard the gates at night to protect the citizens within the walls. To pay those watchmen, the city extracts a flat fee of a few dollars a month per household. Now, on the the one hand, this is the height of fairness, yes? Everyone pays the same amount. However, on the other the actual value of the service provided accrues far more to the wealthy than to the poor. Sure, the whole city receives protection, but the value of that protection is far larger for the rich, who have more to protect and who would be the likely target of the brigands kept at bay by the diligent watchmen. And there is also the pesky fact that the poor have a difficult time paying the monthly fees whilst to the wealthy it is no big deal. Surely in such a situation there is a disproportionate value being provided to the wealthy is such a case and therefore represents an upward redistribution of value up to them. The usage of the flat fee here is illustrative of the fact that even when costs are the same, the benefits may not accrue to all in equal measure. Even if there is some progressive tax based on income level, is there not still more value attached to the protection afforded the wealthy than that afforded the near destitute in this scenario?
It must be understood that there is a difference between the fact that some people will receive more benefits from government than they pay for and the notion of income leveling (i.e., radical redistribution that would make everyone economically the same-at least in theory). Indeed, the entire discussion of fiscal policy is one that cannot ignore these issues and to pretend otherwise is to ignore the fundamentals of government.
Therefore, the issue is not whether a government should redistribute or not, but rather what will is redistribute, how much and to what end.
My point in a nutshell: it is impossible to set up a government in which everyone pays in the same amount and receives back the same measure of benefits. Given that, the debate is about the mix of the two and it is complicated mix at that.
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*This is true not just in terms of how many miles a given person commutes each day, but it terms of things like whether a given person is prone to buy more products shipped from greater distances than another person or whether one’s source of income is more, or less, dependent on the roads.
**Whether they work in government, a church or some nonprofit enterprise.
