Does Government Really Redistribute Income to the Poor?

Jim at Our Word is Our Weapon cites Stumbling and Mumbling's contention "that high government spending means the tax system cannot be used to redistribute income." The larger the size of government, the more of the tax burden, proportionally, has to fall on the middle class.

Jim responds:

But when we're looking for redistribution in a system, the point isn't whether most taxes fall on people who aren't rich - it's whether the rich pay a higher share of taxes and receive a lower share of benefits than the poor.

And in the case of the UK, he finds the answer in the affirmative.

I think Jim overestimates the real redistributive effect of the present system (at least insofar as it involves redistribution from rich to poor; its tendency to promote the opposite form of redistribution is a different matter). Because of state interventions in the market that enforce unequal exchange and thereby require producers to sell their labor on unequal terms, labor is forced to accept far less than its product as a wage. I believe that the total loss of labor-product, by the majority of the working and middle classes, is far greater than the pittance redistributed by the welfare state. The welfare state, by using a tiny portion of the stolen labor-product to ameliorate the most politically destabilizing outbreaks of homelessness and starvation among the underclass, acts in effect as a form of political insurance to guarantee the exploitation of the rest of us.

In addition, the state's policies substantially raise the threshold of subsistence in other ways, thus further reducing the bargaining power of labor. Licensing cartels, anti-jitney laws, unnecessary restraints (through alleged "safety codes") against self-built housing and off-the-grid power systems, prosecution of squatters and pan-handlers--the list is almost endless. Could the underclass squat on vacant land, and use alternative cheap methods (e.g., "cob houses" and earthships) to construct its own homes; and could they buy goods without the 20% oligopoly markup resulting from the government's cartelization of the corporate economy--the threshold of subsistence would be far lower. And there would be far, far fewer desperate people on the margin, on whom the proliferation of low-wage McJobs, "payday lenders," and other predators depends.