Questions:

Transfer payments represent payments for which no good or service is provided in return. Examples of such payments are social security payments, unemployment compensation, and welfare programs. Taxes and transfer payments are used, in part, to provide a more equitable distribution of income.

1. Use Bureau of Economic Analysis data to determine what percentage of personal income is derived from transfer payments in the most recent year reported.
2. Use this data to determine what percentage of personal income is paid in the form of personal tax (and nontax) payments in the most recent year reported.
3. Can the existence of tax and transfer payment programs be justified on the basis of the Pareto efficiency criterion? Why or why not? (If not, is this a possible shortcoming of the criterion?)