Matthew Ladner

Census Bureau Data Show Tax Rates Related to Poverty Reduction

Posted on November 14, 2006 | Type: Press Release | Author: Matthew Ladner
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PHOENIX - Today the Goldwater Institute released a study examining state poverty trends from 1990- 2000. States with low tax rates were more successful at reducing general and childhood poverty than their high tax counterparts.

The report, How to Win the War on Poverty: An Analysis of State Poverty Trends, by Goldwater Institute Vice President for Research Matthew Ladner, PhD, examines U.S. Census Bureau data and grades each state on its progress in reducing poverty.

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.

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.

Dr. Ladner explains, 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.

Top-scorers Minnesota and Mississippi each earned an A+ for reducing poverty by 22.5 percent and 21 percent, respectively. Meanwhile, Rhode Island and Hawaii fell in the F- category for large poverty increases of 24 percent and 28.9 percent.

The report also examines Arizona and California, two states that have embraced different fiscal policies. In 1990, 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, earning it a B in poverty reduction, while California's rose to 14.2 percent, earning it an F.

View an interactive map displaying state-by-state poverty reduction rates and grades.

Download How to Win the War on Poverty: An Analysis of State Poverty Trends or to receive a mailed copy contact Ann Seiden at (602) 462-5000 x 223.

Contact: Starlee Rhoades, (602) 462-5000 x 226.

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