Saturday, December 16, 2006

Lower Taxes and Lower Child Poverty

In the ten years since Congress passed welfare reform (Clinton vetoed it twice, then signed it and claimed credit) the 50 states have had latitude to take their own route. Some states chose to raise taxes and raise spending; others lowered taxes and controlled spending. The states with lower taxes have lower child poverty, the Christian Science Monitor reports:
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.
Why? Growth:
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 original source is a study from the Goldwater Institute: "How to Win the War on Poverty: An Analysis of State Poverty Trends."

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