Much criticism of the welfare state revolves around the problem of “robbing Peter to pay Paul,” i.e., redistributing money to individuals through government transfers in a way that doesn’t make the whole better off. But what about robbing Peter to pay . . . Peter?

That’s what a big chunk of transfer payments wind up doing, according to an op-ed by Judge Glock of the Manhattan Institute in today’s Wall Street Journal. New research from MI finds that about 20 percent of government benefits recycle back to the government in the form of taxes. “That means that in 2022 almost $800 billion—or roughly what the government spent on defense—went out one door and in another,” Glock writes.

This inefficiency doesn’t affect the poor as much as it affects the middle class:

Many claim that the so-called “middle-class welfare state,” including health insurance subsidies and means-tested programs for workers far up the income ladder, is a boon to working families. But taxes that cancel out benefits are the highest for households that aren’t poor and don’t receive Social Security. For them, about 45% of all benefits are returned as taxes. For those in poverty, only about 3% of benefits are returned in taxes.

Social-democracy advocates should beware:

Understanding this should make lawmakers think twice about creating a universal European-style welfare state in the U.S. Europe’s programs come with payroll and sales taxes that are in some cases double the American rates. These high taxes are paid by the same families that receive the supposed benefits. It would be better for the U.S. to give targeted help to those in need instead of increasing taxes only to return some of the money in less useful forms.

Read Glock’s whole article here.