June 4, 2007
For more information, contact Bill Ahern at 202-464-5101
full study online at http://www.taxfoundation.org/publications/show/22428.html
Washington, D.C., June 4, 2007 - Between $376 billion and $872 billion per year is fiscally transferred from middle-aged groups to the youngest and oldest Americans each year through government taxes and spending, according to a new study of taxing and spending by age groups.
America's youngest households, those headed by someone 25 or less, receive $2.32 in government spending for each dollar of taxes paid, and America's oldest households aged 75 and over receive $4.93 per dollar of taxes paid. Meanwhile, in the middle, households aged 45 to 54 received 73 cents per tax dollar.
"As the Baby Boom generation prepares to retire, lawmakers should be aware of the distribution of taxes and government spending across age groups," said Tax Foundation economist Andrew Chamberlain.
The study is titled "Generational Equity: Which Age Groups Pay More Tax, and Which Receive More Government Spending?" by Gerald Prante and Andrew Chamberlain. It is number 156 in the Tax Foundation Special Report series, on the web at http://www.taxfoundation.org/publications/show/22428.html.
Over a lifetime, government spending follows a U-shaped pattern, with large education and welfare spending in youth and large Social Security and Medicare payments in old age.
Spending on the elderly is largely in the form of transfer payments, transferred through such famous programs as Social Security, Medicare and Medicaid. Other transfer payments include welfare, farm payments, unemployment insurance and the refundable portion of the Earned Income Tax Credit (EITC). In 2004 government spending on transfer payments was about $13,000 per household, or 42 percent of all government spending.
Young households receive most government spending in the category of "private goods," things that aren't cash payments but are still supplied directly to identifiable households. These include spending on roads, airports, public schools, police and fire protection, parks, energy, and mass transportation. These added up to about $9,960 per household in 2004, or about 32 percent of overall government spending.
"Public goods" made up the rest. These spending programs are not targeted at certain people but at the entire population—such classic government functions as national defense, environmental protection, criminal justice and so on. In 2004, total spending on public goods was $8,150 per household, or about 26 percent of total government spending.
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The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
For more information, contact Bill Ahern at 202-464-5101