Public spending is redistributed towards the middle class, because it holds the decisive political weight.
Stigler published Director's proposition in 1970: public expenditure tends to benefit middle-income groups, while taxes are borne substantially by both lower- and higher-income groups. The political mechanism behind it is a public-choice hypothesis rather than an established finding.
In practice
- A tax relief on mortgage interest is defended as help for ordinary families and is worth most to households well above the median.
- A free tier of a public service is used disproportionately by those who could pay, because they know it exists.
- Possible explanations
- The proposed explanation is political weight: the middle holds the decisive votes, so programmes are designed to reach it, while the taxes to fund them fall on those above and below.
- In its favour
- The pattern fits large universal programmes in health, education and pensions, whose benefits are concentrated in the middle of the distribution, and it predicted the political durability of universal schemes.
- Against it
- The distributional claim depends heavily on how benefits and taxes are measured over a lifetime rather than a year, and it is a public-choice hypothesis rather than a measured regularity.
- Standing
- The redistribution claim is Director's proposition as published by Stigler; the political mechanism behind it is a public-choice hypothesis.
- Further reading
- Wikipedia
- Subject
- Law & Politics
- Essay
- What can be proved and measured about power