Our Opinion: Taxes and Poverty

Posted on November 15, 2006 | Type: In the News
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This is about taxes and the rise of the Democrats, so we expect Democrats eyes to glaze over immediately.

That's the problem; Democrats eyes glaze over every time they hear conservatives start talking about the evils of high taxation. They believe, despite overwhelming evidence to the contrary, that raising taxes increases government revenue.

It doesn't; Art Laffer, first propounder of the theory that lowering taxes generally raises government tax revenue, has long since been vindicated. George W. Bush's tax cuts are only the latest proof of Laffer's theory (called, as it happens, the Laffer Curve, which makes it an easy target for scoffers; had his last name been, say, Hornbuckle, the appellation, Hornbuckle's Curve wouldn't have carried the same potential for ridicule.)

In any case, not only does lowering taxes increase government revenue, lowering taxes impacts the economy in a huge variety of other ways.

Latest example comes in a study released Tuesday by the Goldwater Institute in Phoenix. The study shows that states with low tax rates from 1990 to 2000 were more successful at reducing general and childhood poverty than states with high tax rates.

According to an Institute press release, From 1990-2000, the national poverty rate fell by 5.3 percent to 12.4, and the childhood poverty rate fell by 9.4 percent to 15.4 percent. The national trend, however, masks tremendous variation by state. Some states reduced poverty more than 20 percent, while others experienced increases of more than 25 percent. The 10 states with the lowest tax burdens saw poverty decline 13.7, more than twice the national average. The 10 states with the highest tax burden, meanwhile, suffered an average 3 percent rise in poverty.

It also pointed out that, The same correlation is found for states with high government spending. The 10 states with the lowest per capita spending enjoyed an 11.2 percent reduction in overall poverty, while poverty rose 7 percent on average in the 10 states with the highest spending.

Why, you ask, should that be so? The Institutes Vice President for Research Matthew Ladner explains it this way: Private-sector growth possesses much greater power in the fight against poverty than government programs. When the private sector grows, aided by low taxes, more jobs are created. When more people have jobs, per capita and median family incomes rise. Jobs, not government spending, lift people out of poverty. And, of course, when high taxes cut into private sector growth, they cut into job formation.

Ah, yes. We all knew that, didn't we? Well, not really. Conservatives did, and do. Liberals didn't, and don't.

And which states provide proof of the theory? Try Arizona and California, states that have embraced different fiscal policies. In 1990, according to the study, Arizona had the fifth-highest tax burden in the nation and almost 16 percent of Arizonans lived below the poverty line. California, on the other hand, had a lower tax burden and a poverty rate of 12.5. During the 1990s, Arizona's tax burden decreased and California's increased. Arizona's poverty levels fell to 13.9 percent, earning it a B in poverty reduction, while California's rose to 14.2 percent, earning it an F.

And just who is advocating higher taxes? Leading the way is incoming Speaker of the House Nancy Pelosi, a San Francisco liberal whose understanding of the free market is probably on a par with her understanding of why the United States Constitution, as written, is important to freedom. She hasnt a clue.

She and the new majority in the House and Senate are about to embark on a liberal agenda: Higher taxes, more regulation of business, more intrusion into our lives. Oh, and by the way, an increase in poverty. And you thought they didn't have a plan.

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