Posted by: Jeff | April 9, 2010

Graphs of the Day

From Tom Schaller, at FiveThirtyEight:

The above figure reports, for all OECD nations during the mid-2000s*, the Gini Coefficient before taxes and transfers. For those unfamiliar with the Gini Coefficient, it is a measure of the distribution of income (or wealth), bounded between 0 and 1, with zero meaning equal distribution across all citizens and 1 meaning that all the income/wealth belongs to the one, richest person. That is, the lower the number the more evenly–though not necessarily fairly, which is a normative judgment for each person to make for herself–income is distributed prior to (or after) government activity in the form of taxes and/or transfers.

As you can see, the before-taxes-and-transfers Gini Coefficient for the United States (.46) is very close to the average for all nations of the OECD (.45). Put another way, the ex ante maldistribution of income here is about the same as for comparable nations. To see what the net effect of those government policies are, we need to look next at the after-tax-and-transfer Gini Coefficients.

And what do you know? As shown in the second figure, which reports after-tax-and-transfer income distribution, of the 26 OECD countries the United States has the most maldistributed income of all 26. This doesn’t mean that tax and transfer policies don’t redistribute; they do, which is why the after-t+t coefficient of .38 is lower than the pre-t+t coefficient of .46.

But that’s not particularly redistributive. In effect, Jonah Goldberg is complaining about the dangers of redistribution in the least redistributive first world nation. Tax-wise, he would be doing much worse as a columnist/author/speaker in almost any other country. But why let that stop him from complaining?

[….]

Dollar for dollar, America offers the most effective and efficient government on the planet, doing so for about 20 cents on the dollar nationally, 28 cents if you include state and local taxes.

I really recommend reading the whole post.

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