Low Property taxes=lower poverty rates

[southsider2k5]

This was an interesting read. I wonder what the causation and correlations really are, or if they are onto something.

 

http://www.csmonitor.com/2006/1215/p09s01-coop.html

 

Want to reduce poverty? Lower those tax rates.

Building a strong economy – and helping the poor – means keeping taxes and government spending low.

By Matthew Ladner

 

PHOENIX – When the US government ended "welfare as we know it" in 1996, it handed responsibility for reform to the states. In so doing, it also created a real-world test of two competing economic strategies used to fight poverty. The results are in and the lessons are clear: Low tax rates lift up the lives of America's poor.

Many people argue that government can reduce poverty by "redistributing" wealth through progressive taxation - imposing higher tax rates on higher income brackets - and through more government spending.

 

Most economists, however, say the best way to reduce poverty is through stronger economic growth. Growth means more jobs, a surefire antipoverty plan. Building a strong economy means keeping taxes and government spending low.

 

A study published last month by the Goldwater Institute, "How to Win the War on Poverty: An Analysis of State Poverty Trends," tests these different theories by examining state poverty rates from 1990 to 2000.

 

Nationwide, states took great strides in reducing both general and childhood poverty. Poverty fell by 5.3 percent and childhood poverty by 9.4 percent. Some states, however, reduced poverty much more than others, while some states suffered large increases.

 

Take Colorado. It reduced its childhood poverty rate by almost 27 percent. Meanwhile, Rhode Island's childhood poverty rate increased by almost the same amount. What accounts for those differences?

 

Using data from the Census Bureau, the report found that states with the lowest tax rates enjoyed sizable decreases in poverty. For example, the 10 states with the lowest total state and local tax burdens saw an average poverty reduction of 13 percent - two times better than the national average. The 10 highest-tax states, meanwhile, suffered an average increase in poverty of 3 percent.

 

Some high-tax states, such as California, Hawaii, and New York, suffered catastrophic increases in poverty. As California began to reject the low-tax legacy of the Reagan governorship, the state's poverty rate jumped 13 percent in the 1990s.

 

Some will be quick to dismiss this as a consequence of illegal immigration. But lower-tax border states such as Arizona and Texas had substantial declines in poverty while also experiencing large increases in immigration.

 

In fact, California's high taxation has been so damaging to the economy that another increase like the one in the 1990s would result in poverty exceeding Mississippi's by 2010.

 

JOHN OVERMYER

 

When a state has a low tax burden, economic growth is stronger. Economic growth delivers more job creation and higher per capita and median family incomes. Economic growth is a powerful means to pull people out of poverty.

 

Although some policymakers justify high taxes for the sake of the poor, the data show that higher taxes and related spending do little to reduce poverty rates. Rather, states with healthy economic climates have much more success in lifting people out of poverty.

 

The causes of, and solutions to, poverty are complex, but one policy is clear: Low tax rates are a significant factor in achieving the universal goal of poverty reduction.

 

Matthew Ladner is vice president for research at the Goldwater Institute, a public policy organization

[Balta1701]

This was an interesting read. I wonder what the causation and correlations really are, or if they are onto something.

 

http://www.csmonitor.com/2006/1215/p09s01-coop.html

It's sort of amazing what you can do with Google and a few minutes of time.

 

Simply using Google, I was able to get data on poverty rates in the U.S. by state for the last 5 years, Here. I was also able to get good estimates of the total tax burden of states on their citizens, for 2005, Here.

 

Simply by plotting those data up, we get this:

 

 

As far as my eyes can tell, the state tax data are virtually uncorrelated with poverty rates in those states. The state tax burdens fall in a fairly limited range, while poverty shows a much higher variation, basically giving you a cloud.

 

The reality is that the Hoover institution is cherry-picking data as much as humanly possible, and making use of stereotypes of states when doing its evaluation. Everyone knows California has huge tax rates right, so if poverty goes up there it must be because of the taxes, right? Well, that excludes the fact that California's property tax system is unbelievably backwards thanks to Prop 13, to the point that it massively offsets other portions of the state tax burden and forces sales taxes through the roof.

 

And New York has high poverty rates and high taxes, so they must be correlated right? Well, that totally neglects the south, which has ridiculously high poverty rates but generally medium to low overall tax burdens. Furthermore, if you only look at the first derivative, the change in poverty rates, you will almost certainly find that in a time of economic expansion, the states with the highest poverty rates should see the largest decreases in poverty, because there is simply more room for them to decrease.

 

When we actually go ahead and plot the data the Hoover Institute wants to cite, the change in poverty rate, versus that measure of state tax burden, the result is a similar total lack of correlation.

 

.

 

There really is no story here except that the Hoover institution is willing to spin numbers in a way that will convince people who accept their claims at face value that their political positions are correct.

[NorthSideSox72]

This was an interesting read. I wonder what the causation and correlations really are, or if they are onto something.

 

http://www.csmonitor.com/2006/1215/p09s01-coop.html

Highly selective.

 

I like the part about CO vs RI. Take a state with rapid economic growth PRIOR to 1996 anyway, especially in the tech sector (CO), and compare it to a state that has been heading down the economic drain for decades (RI). And then choose a one year change rate to compare? Then there is CA and NY, the two most urbanized states in the union. Big surprise that they have high taxes.

 

I actually agree that, to an extent, lower taxes are better for the economy and can (when combined with other policies) help keep poverty minimized. But this article claiming direct correlation is pretty well ridden with holes.

[mr_genius]

i luuuuv studies that suggest lowering property taxes

[EvilMonkey]

Property taxes are evil!

[Balta1701]

The actual article 2k5 posted doesn't even mention property taxes as far as I can tell.

[mr_genius]

The actual article 2k5 posted doesn't even mention property taxes as far as I can tell.

 

so, i can still luuuv articles that do.

[sox4lifeinPA]

so, i can still luuuv articles that do.

 

He can. It's true.