The Christian Science Monitor has an interesting op-ed written by a fellow at the libertarian Goldwater Institute on how states that lowered taxes between 1990-2000 reduced their poverty levels:
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.
The leftist conception is that by raising taxes you redistribute income to the poor and make the poor better off. The problem with that concept is that it never seems to work. What eventually happens is that the taxation hits the productive members of society, who are forced to cut back on hiring, and more people go out work.
The only long term solution to poverty isn’t to be found in redistribution of assets, but in sustainable economic growth. Government handouts are at best, a stopgap against poverty. The one truly great thing that Bill Clinton did is finally acquiesce to passing significant welfare reform, which got tens of thousands of people off the government dole and into the world of productive work. The result of those reforms was a massive reduction in poverty across all levels, especially among the most vulnerable.
The Goldwater Institute study just supports what casual observation shows: high taxes don’t reduce poverty. The redistributionist model simply doesn’t work. Throwing money at the problem is a simplistic solution that benefits those with a deep-seated sense of noblesse oblige rather than those such programs are designed to help. Programs like the Earned Income Tax Credit provide incentives for positive activity — working a steady a job. Government handouts incentivize negative activities — trying to stay on the dole for as long as possible. That isn’t to say that all handouts are unnecessary — some people need a temporary lift up, but when those handouts become a way of life, the only effect is to keep that person forever under the bootheel of the state. Such paternalism is not only ineffective, but harmful.
The best way to reduce poverty remains the same as it always been: create incentives for people to stay in school, not have children out of wedlock, stay off drugs, and work full time. We could double or even triple welfare payments and not reduce poverty by as much as programs that support strong marriages and stable working habits.
To keep our economy strong, we need to support marriage, jobs, and economic development. That’s the best recipe for fighting poverty, not redistributionism that seeks to throw money at a problem rather than understanding why it exists.