Tags: Moore | tax | income | inequality

Heritage Foundation's Moore: High-Tax States Have Greatest Income Inequality

By    |   Wednesday, 15 Apr 2015 07:00 AM

Many Democrats support higher taxes for the wealthy, but the evidence argues strongly against that as a good strategy to pay for new social programs, says Stephen Moore, an economist at The Heritage Foundation.

"In recent years, blue states such as California, Illinois, Delaware, Connecticut, Hawaii, Maryland and Minnesota . . . raised taxes on their wealthy residents," he writes in The Washington Times.

"How did it work out? Almost all of these states lag behind the national average in growth of jobs and incomes."

And these states end up with the worst income inequality too, Moore says. "The blue states that try to lift up the poor with high taxes, high welfare benefits, high minimum wages and other Robin Hood policies tend to be the places where the rich end up the richest and the poor the poorest."

He cites California as an example. "It has the highest tax rates of any state. It has very generous welfare benefits. Many of its cities have a high minimum wage. . . . Yet the state has nearly the highest poverty rate in the nation," Moore explains.

Meanwhile, Americans are concerned about the growing inequality of income, but they don't see the government as a solution for the most part, according to a new study by four esteemed professors for the Washington Center for Equitable Growth.

"The survey shows that while respondents who view information about inequality are more likely to believe that inequality is a serious problem, they show no more appetite for many government interventions to reduce inequality — with the notable exceptions of increasing the estate tax and the minimum wage," the professors write.

They are Ilyana Kuziemko of Princeton University, Michael Norton of Harvard University, Emmanuel Saez of University of California-Berkeley and Stefanie Stantcheva of Harvard.

For the survey, more than 10,000 respondents were randomly assigned to view a short online presentation conveying information about income inequality or to a control group that did not view this presentation.

When respondents were given the actual data on the growing income gap in the United States, their concern about the problem increased by 35 percent.

When respondents in the treatment group learned the small share of estates subject to the estate tax (roughly one in 1,000), their support increased at three times the rate of the control group.

Similarly, after reviewing the presentation on income inequality, support for raising the minimum wage jumped 4 percent (from an already high baseline of support of 69 percent) in the treatment group relative to the control group.

"Our working hypothesis is that those surveyed alighted on the estate tax because it applies to many fewer Americans than respondents had assumed," the authors say.

"And respondents favored increasing the minimum wage because doing so does not necessitate heavy government involvement, unlike, say, the Supplemental Nutrition Assistance Program, or food stamps for low-income Americans."

Bottom line: "The survey reveals a deep mistrust of the federal government’s ability to administer programs effectively and efficiently even after confronted with the importance of these programs in alleviating poverty among those Americans at the bottom of the ladder," the professors conclude.

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Many Democrats support higher taxes for the wealthy, but the evidence argues strongly against that as a good strategy to pay for new social programs, says Stephen Moore, an economist at The Heritage Foundation.
Moore, tax, income, inequality
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2015-00-15
Wednesday, 15 Apr 2015 07:00 AM
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