Chart of the Day: Transfer Payments

Warren Buffett's recent column focused mostly on the "sources of government revenue" and the income taxes collected from the "super-rich," which he suggests should be immediately increased with higher rates on incomes above $1 million to reduce the national debt and deficit. 

But there's also the other side of the equation - the "uses of government revenue" that Mr. Buffett did not address.  The chart above shows "transfer payments as a share of government spending" from 1929 to 2010 (BEA data here), which has doubled from 22% in 1966 to 44% last year.  If this trend continues, we might reach a point where no amount of taxation on the rich or super-rich can finance an unsustainable "transfer society."  At some point, the mega-rich might just "go Galt." 

Exhibit A: "Controversial Ryanair boss Michael O'Leary has warned that he will leave Ireland and become a tax exile if rates for high earners become exorbitant. "Europe will realize, as they are in the US, that a tiny proportion of the working population supports a ludicrous amount of incentives and feather-bedding for people who don't want to or won't work," he said."