Jay Reding.com

Lower Taxes, Lower Poverty

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.

17 responses to “Lower Taxes, Lower Poverty”

  1. Seth says:

    Wow. Nothing about regional economic trends taken into account at all. Nothing about how states that already have some of the lowest tax rates (not the ones that decreased them from 1990-2000) are the ones that are generally the poorest.

    And it mentions Colorado as a shining example. Too bad Colorado had budget shortfalls to the point that it had to quit giving some schoolchildren mandatory vaccinations for a while and the voters rejected a large part of TABOR after a few years of it.

    I’m not arguing against lower taxes, but I’m not convinced this study shows anything.

  2. Jay Reding says:

    Wow. Nothing about regional economic trends taken into account at all. Nothing about how states that already have some of the lowest tax rates (not the ones that decreased them from 1990-2000) are the ones that are generally the poorest.

    Which is why it behooves you to read the whole thing. (Granted, I did neglect to link to it. The full report is available here.) The study states:

    Another possible way to explain poverty trends is through regression to the mean. States with high levels of poverty in 1990 might have found it much simpler to reduce poverty rates than states with low rates. Twenty-five percent of Mississippians, for example, lived below the poverty line in 1990, while only 6.4 percent of those living in New Hampshire lived in poverty. One could argue that New Hampshire had nowhere to go but up, while Mississippi had nowhere to go but down. Several of the states that were star performers in poverty reduction, however, began the 1990s with poverty rates well below the national average. Colorado, Iowa, Minnesota, and Wisconsin, for example, began the decade with poverty rates well below the national average and still experienced dramatic declines. The District of Columbia meanwhile had a poverty rate 29 percent higher than the national average in 1990 but 60 percent higher than the national average in 2000.

    They also use Arizona and California as states with similar regional characteristics as an example for why the effect does exist in practice. If anything, California’s more diverse economy should have done better than Arizona’s but yet Arizona saw a reduction in poverty while California’s went up — and this was during the height of the Internet boom, when California’s overall rate of wealth was staggering.

    And it mentions Colorado as a shining example. Too bad Colorado had budget shortfalls to the point that it had to quit giving some schoolchildren mandatory vaccinations for a while and the voters rejected a large part of TABOR after a few years of it.

    Actually, they do take that into consideration in Note 18:

    In 2005, Colorado voters narrowly voted to temporarily suspend TABOR, after the early decade recession “ratcheted [sic] down” state government spending. The combination of a general economic downturn and a reduction in air travel following the attacks of September 11, 2001, forced cuts in state government spending, which then under TABOR became the new baseline for the following year. This is a design feature of TABOR that need not be replicated in other states.

    However, Minnesota had the top spot, with Wisconsin close behind. Neither of those states are low-tax states by any stretch of the imagination, although both did enact significant welfare reform measures in the 1990s. It would be interesting to do a more detailed analysis of whether those states disprove the Goldwater Institute’s hypothesis or whether other factors (such as strong economic growth unrelated to tax rates) are responsible.

  3. Seth says:

    1.) If you name Minnesota as having a low poverty, and you’re saying that Minnesota has had high taxes for a long time, then it’s tough to state there is a strong correlation between low taxes and low poverty. Also, if you’re a big fan of Pawlenty, you’d have to note that Minnesota had a huge budget shortfall in 2000, meaning Minnesota had low taxes but wasn’t able to balance the budget.

    2.) Conversely, Mississippi has had low taxes for quite some time, and it’s still very poor.

    3.)

    They also use Arizona and California as states with similar regional characteristics as an example for why the effect does exist in practice. If anything, California’s more diverse economy should have done better than Arizona’s but yet Arizona saw a reduction in poverty while California’s went up — and this was during the height of the Internet boom, when California’s overall rate of wealth was staggering.

    But the Public Policy Institute of California clearly says:

    Poverty rates grew substantially in California during the 1980s and then fell during the 1990s.

    It also notes that the dreaded hippie communists of San Francisco have the lowest poverty rates in California.

    Basically this study picked an arbitrary time to start, and then tries to find a correlation that doesn’t really exist. It doesn’t take into account regional or inter-state trends, trends leading into the 1990s or trends since. Also, if you want to be technical about it, you’d note that tax policy most likely takes several years to works effects throughout the system. A far more accurate approach would take taxes between 1985 and 1995 (or something like that) against poverty rates between 1990 and 2000.

    The report also notes the huge reduction in poverty between the end of WWII and the late 1970s–a time of rising taxes.

    The whole thing is just a shoddy piece of work designed to give the far right some talking points. It’s not much more than a political hack job.

  4. Jay Reding says:

    1.) It doesn’t mean there’s no correlation, just that other factors may be in play. Furthermore, blaming Pawlenty for a budget shortfall doesn’t make sense as he wasn’t elected governor until 2002. The governor in 2000 was Ventura, and as much as we’d all like to forget that, it’s still true.

    2.) Except Mississippi’s poverty rate is decreasing faster than high-tax states. Mississippi’s poverty rate fell 21% from the baseline average from 1990 to 2000, despite having a much more limited economic base than California or other states.

    3.) The methodology used in the two studies is different. The Goldwater study is using the national mean decrease of 5.3% as its baseline. Real poverty did fall in California (as a percentage of the population) but the fall in California’s population was still 13.6% less than the national baseline. Arizona, a comparable state in the region saw their level of poverty be reduced by 11.5% greater than the national mean.

    It also notes that the dreaded hippie communists of San Francisco have the lowest poverty rates in California.

    Gee, you mean that one of the richest areas in the country has a shocking lack of poor people? I’m shocked by such news! I would have figured that someone barely scraping by would want to live in the single most overpriced area of the nation…

    Basically this study picked an arbitrary time to start, and then tries to find a correlation that doesn’t really exist. It doesn’t take into account regional or inter-state trends, trends leading into the 1990s or trends since. Also, if you want to be technical about it, you’d note that tax policy most likely takes several years to works effects throughout the system. A far more accurate approach would take taxes between 1985 and 1995 (or something like that) against poverty rates between 1990 and 2000.

    So, instead of picking 1990 as an “arbitrary” place to start, you’d pick 5 years earlier? Did you ever consider that maybe the reason for those two data points is because that’s when they take the national Census? If you want to get two consistent national datapoints, you either have to use the Census or try to make an apples and oranges comparison of disparate state data that could easily cloud your results. Furthermore, a decade is more than enough time to see the effects of tax policy on poverty rates, regardless of which time series you use.

    The report also notes the huge reduction in poverty between the end of WWII and the late 1970s–a time of rising taxes.

    Also a time of massive economic growth. Furthermore, that time was not a time of rising taxes at all levels – Eisenhower instituted a major tax cut in 1954, and Kennedy followed suit in 1964 with one of the largest tax cuts in US history. Furthermore, this was long before LBJ’s Great Society program – the point is that economic growth was high, yet anti-poverty spending was relatively low. The correlation between social program spending and actual reductions in poverty is simply not there.

    The whole thing is just a shoddy piece of work designed to give the far right some talking points. It’s not much more than a political hack job.

    Translation: I don’t like what it says, and I don’t want to understand it, so I’m going to stick my fingers in my ears really loud and go back to reading Mother Jones

  5. Seth says:

    1.)

    It doesn’t mean there’s no correlation, just that other factors may be in play.

    Exactly. It also doesn’t prove there is a correlation. That’s what I’ve been saying all along.

    2.) If Mississippi has a low tax rate from 1900-2000 and has high rates of poverty from 1900-1990 and then poverty rates are still high 1990-2000, but have a slightly better decrease than other states (although the overall poverty rate remains markedly higher than in most states), I would call 1990-2000 somewhat of an aberration and question whether the tax system was perhaps leading to some of the poverty.

    3.) San Francisco has, somehow over time, created a lot of prosperity. The entire city has poverty lower than every other city in California and most cities in America, despite being run by pinko tax and spend liberals. There’s no evidence that in San Francisco, relatively higher rates of taxation are leading to an increase in poverty, even though that’s exactly what you’d expect to see after the dot-com bubble burst.

    4.) So instead of working harder to find better data (I somehow don’t think it would be all that hard to figure out what tax rates in each of the states were in 1985. In fact, it seems to me that it would be pretty damned easy), you’ll just use flawed data, shrug and say “oh well,” and claim that it’s still a good study.

    Let’s explain something to you. Say a state has 10% poverty in 1990. That rate falls to 5% in 1998. In 1998, the state legislature passes massive tax cuts, requiring the state to slash aid to poor people in the working class, and the poverty rate climbs to 7% in the first two years. So, by 2000, even though the poverty rate climbed after the tax cuts, this study would say there is a correlation between cutting taxes and lowering poverty, even though that would appear to not be the case. Then let’s say in the same state, the effects of the cuts take their toll and by 2004, poverty in the state is 15%. Now we’d be seeing the effects of the tax cuts increasing poverty, but this study would still claim the opposite.

    That’s why the study is crap. It would be much better to measure something like this in the 10 years after a tax cut, rather than picking some arbitrary timeline. That’s why this is a bad study that doesn’t show anything other than its author wants to pay fewer taxes.

  6. Jay Reding says:

    1.) Except for the part where it does.

    2.) Which assumes that the initial cause of poverty in Mississippi had anything to do with taxation – which it doesn’t. Again, had you bothered to read the study you’d have seen the part where they already dealt with that objection:

    Five of the bottom 10 states in per capita income are Southern states. This largely represents a legacy of the century of economic stagnation following the Civil War. Southern states clung stubbornly to a status quo in economics and politics, which slowly transformed it from being one of the wealthiest regions in the world before the Civil War to having a per capita income around half the national average by the early 1940s.

    It’s only in the last few decades that the South has converted to an agrarian economy to a modern one, with the economic growth uplift that such a transition provides.

    3.) San Francisco has, somehow over time, created a lot of prosperity. The entire city has poverty lower than every other city in California and most cities in America, despite being run by pinko tax and spend liberals. There’s no evidence that in San Francisco, relatively higher rates of taxation are leading to an increase in poverty, even though that’s exactly what you’d expect to see after the dot-com bubble burst.

    So, wait, every city should follow suit and increase the costs of housing to astronomical levels? San Francisco has, by far, the most expensive housing market in the country. No shit there aren’t any poor people in San Francisco — they can’t afford to live there. The median value of housing in San Francisco is $820,482 – roughly four times the national average.

    And in fact, the very public policy organization you cited previously finds that a more accurate poverty assessment makes San Francisco one of the most unlivable cities because the price of housing is so wildly inflated. Yes, if you make $100,000 in Sioux Falls or Mankato, you’re very well off. If you make $100,000 in San Francisco, you probably live in a shoebox and eat ramen all day. Technically, you’re not anywhere near the poverty line, but your buying power is as low as someone who would be anywhere else. When the PPIC adjusted for housing costs, San Francisco County’s poverty rate jumped to 19% – which happens to put it in the same class as Mississippi in terms of real poverty.

    But hey, if all of America consisted of rich white liberals, there wouldn’t be poverty, right?

    4.) So instead of working harder to find better data (I somehow don’t think it would be all that hard to figure out what tax rates in each of the states were in 1985. In fact, it seems to me that it would be pretty damned easy), you’ll just use flawed data, shrug and say “oh well,” and claim that it’s still a good study.

    Again, you completely and utterly fail to understand the point. It’s not tax rates that are the problem, it’s having a national standard measurement of poverty rates. That’s why you use the Census as a guide because the Census has the most complete count using the same measuring stick between data points. There’s absolutely no flaw in the data at all.

    Let’s explain something to you. Say a state has 10% poverty in 1990. That rate falls to 5% in 1998. In 1998, the state legislature passes massive tax cuts, requiring the state to slash aid to poor people in the working class, and the poverty rate climbs to 7% in the first two years. So, by 2000, even though the poverty rate climbed after the tax cuts, this study would say there is a correlation between cutting taxes and lowering poverty, even though that would appear to not be the case. Then let’s say in the same state, the effects of the cuts take their toll and by 2004, poverty in the state is 15%. Now we’d be seeing the effects of the tax cuts increasing poverty, but this study would still claim the opposite.

    Um, no, that would not be the case at all.

    That’s why the study uses the national rate of decline as the baseline measurement. The national baseline between 1990-2000 was a 5.3% reduction in poverty. In your hypothetical the reduction in poverty would have only been 3%, which would then yield a figure over the baseline. Furthermore, the whole point is that you’re drawing extrapolations from a time series in tax policy. Not all states cut taxes in 1998 – some cut them in 1994, some in 1992, others in 1990. What the study does is compare overall tax policies over a series of time against a known benchmark – the national average decrease in poverty. They are not comparing the effect of specific tax cuts, just comparing the average tax burden and the average decrease or increase against the baseline.

  7. Seth says:

    1.) Saying “yuh huh it does too” is the most sophisticated argument you’ve made in a while. If you are saying A leads to B and then you agree C may lead to B, then it pretty much puts the part about A leading to B into major doubt.

    2.) If you are saying that factors other than tax policy can lead to poverty over the long run, then you’d think the same would apply in the short-term as well. Which is pretty much what I’m saying.

    3.) Now you’re making an argument based on adjusting the poverty level for the realities of costs of living. You’ll be a good Democrat in no time, but you’ve pretty much eliminated yourself from a research position at any conservative think tank in the business.

    4.) I didn’t fail to understand the point. I plainly and perfectly said we could keep poverty levels for 1990-2000. We just need to measure the tax policy that was having an effect on poverty levels from 1990-2000, which is a different data set than the policies enacted from 1990-2000. That seems pretty elementary to me.

    Ok, let me give you a hypothetical again. Nationally, poverty falls at a rate ‘y’ from 1990-1998, but in our state, poverty falls twice that, so ‘2y’ over the same period. In 1998, the state legislature passes massive tax cuts, requiring the state to slash aid to poor people in the working class. From 1998-2000, the national poverty rate rises (call it, ‘x’) but in our state poverty rises as a result of the cuts in services, 2x. So, by 2000, even though the poverty rate climbed versus the national rate after the tax cuts, this study would say there is a correlation between cutting taxes and lowering poverty, even though that would appear to not be the case. Then let’s say in the same state, the effects of the cuts take their toll and by 2004, poverty rises at three times the national average from 2000-2004. Now we’d be seeing the effects of the tax cuts increasing poverty, but this study would still claim the opposite.

    And you don’t think this happened very much? Remember a little thing called the “Republican Revolution?” That was in 1994, meaning there are a significant number of states that elected a tax-cutting crowd state legislatures who didn’t get into power until 1995. Even if they were successful in passing tax cuts on their first try, these states are looking at the cuts taking effect in FY 1996 at the earliest. That means for any state affected by the Republican Revolution, it was most likely at least late 1996 before the tax cuts even went into effect and probably 1998 or 1999 before they were having any effect on poverty rates or the economy. Given the scope of the Republican victory in 1994, we can make a pretty good assumption that taxes in many states were at a certain rate from 1990-1995, and at some lower rate from 1995-2000 relative to the states where Republicans did not take over. Which is why it wouldn’t make sense to measure poverty against the national rate in these states from 1990-1995.

    The bottom line is precisely that we don’t know for sure because this study didn’t bother to look at it.

    They are not comparing the effect of specific tax cuts, just comparing the average tax burden and the average decrease or increase against the baseline.

    If state A has taxes at a certain rate that is even from 1990-2000, and state B pushed through a massive and irresponsible tax cut in 1995, which state would be in the “lower tax burden” category for this study? Then what happens if state B does it again in 1996 and 1997?

  8. Jay Reding says:

    1.) There is a correlation. The study shows it. We can argue all day about how strong that correlation may be, but the results speak for themselves. Those states with the lowest levels of taxation tended to do better than those states with the highest. That’s a correlation. It doesn’t say that tax cuts necessary will always reduce poverty, but it does suggest a relationship between the two, and it certainly does show that there’s no correlation the other way.

    2.) Again, the study isn’t trying to show that specific tax cuts cause specific decreases in poverty. It’s suggesting a correlation, not implying causation. It’s also showing that there is no correlation between high taxation and low poverty — which is why places like DC have incredibly high levels of poverty despite massive amounts of government spending.

    3.) Give me a break, one of the criticisms of the concept of the “living wage” is that what would be necessary as a “living wage” in San Francisco would be unaffordable in Boise. There’s nothing wrong with using local cost-of-living measurements in ascertaining local measurements. Second, you’re the one who proffered the argument that San Francisco has low poverty, when your own source says that it really doesn’t. It’s your argument, not mine.

    4.) You seem to be unable to understand how this study works. If poverty went up as a result of a tax cut in 1998, then the reduction in poverty would be less than the average. There are only two data points being measured: 1990 and 2000. So if poverty went down at 2 times the national rate from 1990-1998 then up at 2 times the national rate from 1998 to 2000, the state would show a zero increase over the baseline. Again, the study isn’t measuring specific tax policies, it’s making generalizations from a baseline.

    Secondly, poverty didn’t increase between 1998 and 2000, so your point is completely invalid anyway.

    You’re proceeding with the a priori assumption that tax cuts increase poverty, when there’s no such correlation to be had. It doesn’t take years for tax policy to change funding levels. It takes precisely one, as tax cuts take effect in the following fiscal year. So if states started cutting taxes in 1995, and they took effect in 1996 and raised poverty, you’d see that the poverty level would be higher than the average in 2000. But the study doesn’t show that – it shows the exact opposite.

    Your attempts to spin your way out of this are transparent – the reality of the situation is that high taxes do not equate to lower levels of poverty, or California would have seen their poverty levels drop faster than the average. Yet when a low-tax state like Arizona sees a larger decrease in poverty than high-tax California despite not having the same large economic base and having the same pressures from immigration, it’s hard to make the argument that taxes lower poverty. But then again, liberals never seem to be able to understand basic statistics or logical reasoning — if they did, they wouldn’t be liberals.

  9. Seth says:

    1.) The point is the study is too broad to show a conclusive correlation. The study shows that states who had lower tax rates at some point in the 1990s had lower poverty over the decade. It treats 1990-2000 as one data point, where to be conclusive it would need many data points.

    2.) The study doesn’t show any correlation. It shows broad trends over a period of time that is not long enough to show broad trends.

    3.) You can either agree with that San Francisco has low poverty or you can agree we need to look at things like poverty using a more regional focus. Which is it?

    4.) I understand perfectly. If there are 8 years of above-average reduction in poverty, and then a tax cut leads to two years of below-average reduction in poverty, then the state has above-average reduction in poverty and below-average taxes. Even though the tax cut led to relative increases in poverty, this study would say the opposite. It’s a pretty elementary counter example to the study. The point is, we don’t know from looking at this study whether this is happening or not because the study doesn’t want to look at that.

    Second, I didn’t say poverty increased between 1998-2000. What part of ‘hypothetical’ don’t you get? If poverty went down nationally between 1998-2000, but stayed the same in a certain state due to massive tax cuts in 1997, then the same example would apply.

    You’re proceeding with the a priori assumption that tax cuts increase poverty, when there’s no such correlation to be had.

    Show me where I’m making that assumption because I’d like to see it. I’m saying it is possible that because of the way this study was done, tax cuts could very well be leading to increases in poverty, but this study would show the opposite.

    It doesn’t take years for tax policy to change funding levels. It takes precisely one, as tax cuts take effect in the following fiscal year.

    They take effect the following year, but not the full effect. That’s why George Bush’s office of Budget Management has budget projections through 2011 and started in 2002, saying the time period from 2002-2011 will be the true scope of the Bush financial policies. It also depends on the type of taxes. If you cut estate taxes, then the full effect is most certainly not felt in the next year. Also, if a tax cut gives you enough money to build a new plant to create jobs, you’d need to keep the tax money for a year or two, invest it in the new building, and then you wouldn’t have the new jobs for a total of 2-5 years. This is simple economics.

    You aren’t listening to a word I’m saying. Say California has a rate of taxation that is current from 1990-2000 (again, this is a hypothetical, let me know if that is a tough concept for you). Poverty in California, for various reasons completely unrelated to tax levels, rises at a rate relative to the national poverty rate that stays constant throughout the decade. California then looks on the bad end–taxes stayed the same, poverty went up.

    Arizona has a rate of taxation that stays current from 1990-1995. From 1990-1995 the poverty rate in Arizona plummets at 4 times the rate of the national rate. Then the slash and burners are elected in 1994, pass their first round of tax cuts in 1995, the second round in 1997 and another round in 1998. Poverty then rises at twice the rate of the national poverty rate from 1995-2000, accelerating towards 2000. Arizona looks very good in your study–overall, poverty in Arizona decreased at twice the rate of the national decrease, and taxes are much lower in 2000 than they were in 1990. Unfortunately, it is entirely possible that the tax cuts were responsible for an increase in poverty. It’s possible that as the full effect of these cuts plays out and the state cuts more and more services, poverty rises at six times the national rate from 2000-2004. Now, any reasonable person would look at what actually happened and say that there is a correlation between cutting taxes and a raise in poverty.

    Now, since it is somewhat logical to assume that there were more tax cuts in the latter half of the decade than there were during the first half of the decade, this scenario could have played itself out several times.

    That is, I’ve given you several concrete examples of things that could have happened that your study would say shows correlation, when in fact it shows the opposite. I’ve shown that it is possible and even likely that my hypothetical happened several times. The bottom line is that to say conclusively that lower taxes leads to lower poverty, you would actually have to measure poverty levels in states after tax cuts and compare them to poverty levels in states that don’t have tax cuts. This study doesn’t do that and it is possible the study measures the opposite. If you actually did understand that, you could lecture me about “understanding basic statistics or logical reasoning.”

    I can see you’re starting to get upset and calling me stupid because I don’t agree with you on this study. Weird.

  10. Jay Reding says:

    1.) 1990 and 2000 are two data points — and the study doesn’t claim to be exhaustive. What it does show is that the commonly-considered correlation between high levels of government spending and actual poverty reduction doesn’t exist – a conclusion shown by other studies as well.

    2.) 10 years isn’t enough time to show broad trends? That’s just silly.

    3.) Use the right measurement for the right area of analysis. It makes no sense to make a national judgment of poverty in San Francisco, nor does it make sense to use San Francisco as a frame of reference in measuring poverty nationally. (Which is why internationally, people use measures like purchasing power parity to gauge the relative strengths of economies.)

    4.) Again, we’re talking about state income taxation. State taxes generally aren’t phased in and take effect in the next fiscal year. The reason why OMB projects through 2011 is because that’s how long the tax cuts remain in effect unless they’re renewed. Your point is completely irrelevant to the study.

    Arizona has a rate of taxation that stays current from 1990-1995. From 1990-1995 the poverty rate in Arizona plummets at 4 times the rate of the national rate. Then the slash and burners are elected in 1994, pass their first round of tax cuts in 1995, the second round in 1997 and another round in 1998. Poverty then rises at twice the rate of the national poverty rate from 1995-2000, accelerating towards 2000. Arizona looks very good in your study–overall, poverty in Arizona decreased at twice the rate of the national decrease, and taxes are much lower in 2000 than they were in 1990. Unfortunately, it is entirely possible that the tax cuts were responsible for an increase in poverty. It’s possible that as the full effect of these cuts plays out and the state cuts more and more services, poverty rises at six times the national rate from 2000-2004. Now, any reasonable person would look at what actually happened and say that there is a correlation between cutting taxes and a raise in poverty.

    Except in the real world, poverty doesn’t decrease like that. Again, this is a baseline analysis. The chances that poverty would experience such radical swings is precisely zero. It makes no sense to discuss hypotheticals that don’t have any relevance to the real world.

    Now, since it is somewhat logical to assume that there were more tax cuts in the latter half of the decade than there were during the first half of the decade, this scenario could have played itself out several times.

    That assumes that states follow national trends. In fact, they don’t. State tax rates don’t necessarily mirror federal tax rates. And again, you’re once again assuming that poverty did in fact go up when tax rates went down. It’s quite possible that the correlation works the other way – that poverty was high until taxes were lowered and growth increases.

    And in fact, let’s take Arizona as an example. Arizona started cutting tax rates in 1992 with the election of Fife Symington as governor. So, by your logic, Arizona’s poverty level should have dropped precipitously from 1990-1992, and then grown at a rate that would still put it well below the national average. Odd then, how poverty rate in Arizona was 15.7% in 1992 when taxes were high, and just happened to drop simultaneously with the tax cuts to 13.9%.

    In fact, you can repeat the experiment for just about any state across just about any time series and pick up on the same general trend. There is no correlation between high levels of government spending and economic success, and there is a correlation between states with low taxes and high economic success. (Economic growth is also highly correlated to reductions in poverty for reasons which should be obvious.)

    So even if your dubious little hypothetical were possible, it doesn’t matter, as that isn’t what happened in the real world. And since we happen to live in the real world and not the world of liberal hypotheticals, the policy implications are quite clear.

    That is, I’ve given you several concrete examples of things that could have happened that your study would say shows correlation, when in fact it shows the opposite. I’ve shown that it is possible and even likely that my hypothetical happened several times.

    And I’ve just show that your hypothetical didn’t in fact happen, and that in fact the opposite happened.

    The bottom line is that to say conclusively that lower taxes leads to lower poverty, you would actually have to measure poverty levels in states after tax cuts and compare them to poverty levels in states that don’t have tax cuts.

    And when I did that, what was the result? 8 years of lower taxes took Arizona’s poverty levels down at a rate much faster than the national average. In fact, you could repeat that experiment for nearly any other set of high tax and low tax states and get pretty much the same results.

    You can try to prove your silly little hypotheticals all you want, but the numbers are there. If the liberal theory about poverty was in fact true, you’d see precipitous declines in poverty correlating with the increases in government spending. Yet that just doesn’t happen to be the case. Reductions in poverty are strongly correlated to periods of economic growth, which are often themselves strongly correlated to periods when taxes are lowered.

    (Oh, and “slash and burners?” Give me a break — and you wonder why I accused you of making unfounded a priori assumptions!)

  11. Seth says:

    1.) Two data points is absolutely not enough to show broad trends. Also, using 10 years, we could probably say that decreasing taxes is correlated to more red-heads being born.

    2.) This study doesn’t figure in purchasing power, nor does it figure out whether people were actually better off. It uses the nationally-defined poverty level. This study doesn’t take that into account. Thanks for pointing out another problem with the study.

    3.)

    Again, we’re talking about state income taxation.

    Except the study deals with overall per capita tax burden, not income tax. Going along with the theme of our discussions, you have to get things right before you can interpret them, and you should definitely get things right before you start calling people stupid.

    Ok, let’s say that in the first half of the decade in a state, the poverty rate goes down at a rate a four tenths of a point better than the national average. In the second half, after tax cuts, it raises at a rate two tenths of a point more than the national average. For the third time, what part of hypothetical don’t you understand?

    With the Arizona example: for the fourth time, that was a hypothetical. How many times does that need to be said? I’m not using any logic or arguing anything other than it’s perfectly logical that things could be going on that would disprove exactly what this study portends to prove. Then I’ve given examples. If your study would have done the same thing for every state and looked at poverty after tax rates were lowered, then it could possibly make the argument you and it are making. One example in Arizona does not equal a trend, and it especially doesn’t equal a trend when you ignore California’s story.

    Reductions in poverty are strongly correlated to periods of economic growth, which are often themselves strongly correlated to periods when taxes are lowered.

    Now you’re turning into a Keynsian. You’ll be a good Democrat in no time.

    Oh, and “slash and burners?” Give me a break — and you wonder why I accused you of making unfounded a priori assumptions!

    The state of Colorado literally had to cut back on mandatory vaccinations for school children in the late 1990s. School children were going without necessary vaccinations. In America. Wonderful.

  12. Jay Reding says:

    1.) Except there would be no correlation between those things because they don’t have a thing to do with each other, unlike tax rates and poverty.

    2.) Again, you miss the point. The study compares state-level trends, not comparing San Francisco and Boise. If this study is flawed because they didn’t use a national measure, then by logical extension every study using national census data is flawed. It’s a dumb argument. Again, the reason why Census data is chosen is because that uses a consistent methodology for all states across a period of time.

    3.)

    With the Arizona example: for the fourth time, that was a hypothetical. How many times does that need to be said? I’m not using any logic or arguing anything other than it’s perfectly logical that things could be going on that would disprove exactly what this study portends to prove. Then I’ve given examples. If your study would have done the same thing for every state and looked at poverty after tax rates were lowered, then it could possibly make the argument you and it are making. One example in Arizona does not equal a trend, and it especially doesn’t equal a trend when you ignore California’s story.

    Except we’re not talking about hypotheticals, we’re measuring things in the real world. It doesn’t matter what your hypothetical might say if that’s not what actually happened.

    Here in the real world, a place with which you seem to only have passing familiarity, those states with the highest tax burdens at the state level reduced poverty at a slower rate than those with less tax burdens. Even when accounting for regional variations, the trend is still there. You can invent all the silly little hypotheticals that you want, but it doesn’t change the real world results.

    Now you’re turning into a Keynsian. You’ll be a good Democrat in no time.

    And again, you amaze us all with your idiocy. Since when would a Keynesian argue for reduced tax rates? There is nothing intrinsically Keynesian about noting that increased growth reduces unemployment – the difference between the two schools is that a supply-side economist would reduce tax rates to produce that growth while a Keynesian would raise spending to “pump prime” the economy. That approach tends not to work too well over the long term.

    The only way I’d become a “good Democrat” these days is to have a lobotomy…

    The state of Colorado literally had to cut back on mandatory vaccinations for school children in the late 1990s. School children were going without necessary vaccinations. In America. Wonderful.

    No, that’s not what happened. In fact, vaccination rates in Colorado increased from 51.7% in 1995 to 71.6% in 2000 – when TABOR was in effect. Immunization rates happen to coincide quite nicely with immigration rates – and Colorado’s dip in immunization rates happens to coincide exactly with an increase in the number of immigrants entering the state.

    TABOR wasn’t without its problems – it should have allowed some additional flexibility for agencies to establish contingency funds and used better budgeting projections to determine each year’s baseline, but the idea was sound even if the implementation was not.

  13. Erica says:

    Except there would be no correlation between those things because they don’t have a thing to do with each other, unlike tax rates and poverty.

    Oof, somebody failed stats! Correlation is simply a measure of the degree of departure from independance of two random variables. What you’re thinking of is causality of course. Completely unrelated things can be, and often are, correlated.

    Surely you’ve heard “correlation does not imply causality?” That’s what is meant by that phrase. In fact, the probability of any two completely unrelated random variables having exactly zero correlation are astronomically low. (Zero, in fact. Traditionally, correlations where |Px,y|

  14. Erica says:

    Woah, lost the last part of that message: “Traditionally, correlations where |Px,y| is less than 10 are accepted as being “probably not correlated” by statisticians.

  15. Seth says:

    1.

    Except there would be no correlation between those things because they don’t have a thing to do with each other, unlike tax rates and poverty.

    You really aren’t that smart. If taxes go up and the number of red-heads being born goes up, there absolutely is a correlation between the two. This study tries to say that if taxes went down from 1997-2000 and the number of redheads went down drastically from 1990-1997 and then raised slightly from 1997-2000 that the two would be correlated, when they are not.

    2.) Should we use national or regional measures for poverty? Trying to get you to answer a question is harder than getting a politician to answer one. You are simultaneously arguing that regional measures for poverty are the best and the not best way to measure things.

    3.) Since you can’t understand examples and since the study doesn’t go into depth about what is really happening in the states, there’s not a whole lot more that anyone can say. To show that tax cuts lead to a reduction in poverty, you would have to show that poverty was reduced after tax cuts. This study does not do that.

  16. Seth says:

    And again, you amaze us all with your idiocy. Since when would a Keynesian argue for reduced tax rates?

    The part that is most frustrating about your stupidity is that you really do think you know what you’re talking about. Keynesians believe in cutting taxes sometimes. That’s why a lot of people thought Bush’s tax cuts in 2001 were Keynesian in nature. It is generally accepted that the Kennedy-Johnson cuts in 1963 were Keynesian. Let’s give you a brief run-down: During times of recession, taxes should be cut to stimulate the economy. Then the economy grows and poverty is reduced. When the economy is growing, taxes should be raised to save up for the next downturn, when cuts and spending will be needed simultaneuously again. To fit that into your theory above that:

    Reductions in poverty are strongly correlated to periods of economic growth, which are often themselves strongly correlated to periods when taxes are lowered.

    To get the economy growing, we should cut taxes, as the economy grows poverty is reduced. Of course, if you are one of the idiots who still thinks supply-side economics works, I can understand how basic economic theory is a little outside of your grasp. At least you aren’t dropping f-bombs in calling me stupid this time.

  17. Seth says:

    And again, you amaze us all with your idiocy. Since when would a Keynesian argue for reduced tax rates?

    The part that is most frustrating about your stupidity is that you really do think you know what you’re talking about. Keynesians believe in cutting taxes sometimes. That’s why a lot of people thought Bush’s tax cuts in 2001 were Keynesian in nature. It is generally accepted that the Kennedy-Johnson cuts in 1963 were Keynesian (your site won’t let a comment with the links go through, so I can’t cite the evidence here). Let’s give you a brief run-down: During times of recession, taxes should be cut to stimulate the economy. Then the economy grows and poverty is reduced. When the economy is growing, taxes should be raised to save up for the next downturn, when cuts and spending will be needed simultaneuously again. To fit that into your theory above that:

    Reductions in poverty are strongly correlated to periods of economic growth, which are often themselves strongly correlated to periods when taxes are lowered.

    To get the economy growing, we should cut taxes, as the economy grows poverty is reduced. Of course, if you are one of the idiots who still thinks supply-side economics works, I can understand how basic economic theory is a little outside of your grasp. At least you aren’t dropping f-bombs in calling me stupid this time.

    The only way I’d become a “good Democrat” these days is to have a lobotomy…

    Saying a majority of American voters this last election had a lobotomy before going into the voting booth sounds pretty elitist to me.

    Here’s TABOR’s legacy:
    Under TABOR, Colorado declined from 35th to 49th in the nation in K-12 spending as a percentage of personal income.
    Colorado’s average per-pupil funding fell by more than $400 relative to the national average.
    Colorado’s average teacher salary compared to average pay in other occupations declined from 30th to 50th in the nation.
    Under TABOR, Colorado declined from 23rd to 48th in the nation in the percentage of pregnant women receiving adequate access to prenatal care, as defined by the Centers for Disease Control and Prevention.
    Colorado plummeted from 24th to 50th in the nation in the share of children receiving their full vaccinations. Only by investing additional funds in immunization programs was Colorado able to improve its ranking to 43rd in 2004.
    At one point, from April 2001 to October 2002, funding got so low that the state suspended its requirement that school children be fully vaccinated against diphtheria, tetanus, and pertussis (whooping cough) because Colorado, unlike other states, could not afford to buy the vaccine.
    Under TABOR, the share of low-income children lacking health insurance has doubled in Colorado, even as it has fallen in the nation as a whole. Colorado now ranks last among the 50 states on this measure.
    TABOR has also affected healthcare for adults. Colorado has fallen from 20th to 48th for the percentage of low-income non-elderly adults covered under health insurance.

    And you want more of the same. Great.