Amusement States
Reader Josh links to a UK Guardian newspaper story that wrings its hands over U.S. state-level taxation and inequality, provocatively titled “Forty-four of 50 US states worsen inequality with ‘upside-down’ taxes.”
“Various state-level policies, such as cutting taxes on the wealthy to supposedly drive economic activity, has worsened this situation, the report found. Inequality in recent decades has been far starker in the US than in other comparable countries,” the article laments, as it endeavors to brazenly split infinitives.
The article doesn’t paint much of a clear picture taken by itself. It assumes several things without establishing any of them, for instance that taxing the wealthy at the state level would work, that the existence of wealth is a problem for government to fix, and so on. An economy’s inequality can increase as an effect of growth and/or technological innovation. But the article seems only to want to gripe about superficial appearances of unfairness measured in dollars and cents.
I’ve always been unimpressed with the idea that tax policy should be there primarily to help governments play Robin Hood and rob from the rich to give to the poor. What’s lamentable these days is that our federal government spends so mightily beyond its means with no plan in sight to get this irresponsible behavior under control.
The problem states face is that if they get too ambitious trying to soak the rich, they risk running off their richer residents who still contribute lots to any state’s economy over all. Taxes on the poor, in contrast, stand out as disproportionate for people who don’t have a lot of total income. A lot of those taxes are based on the taxpayer’s spending rather than on a share of income, such as sales taxes and excise taxes. In the latter instance, the taxes on tobacco and alcohol—also known as “sin taxes”—are high and disproportionately paid by people in lower income brackets because the rate of substance use is higher among poorer income groups. Furthermore, the taxes on sins are meant to be punitive so as to coax the sinners into changing their ways.
If you think of a state as an amusement park and the state’s taxes and fees as the entry ticket price, it soon becomes clear that the park operator has to charge everyone something to get in. That something is going to be a larger share of a poor person’s wherewithal than a rich person’s. The richer visitors will have the means to spend more money on discretionary items at the park. Those with more spending money will be able to afford the fancier meals or better seating at shows or on amusement park rides. The richer visitors’ spending will improve the park’s general finances and profitability. If the entry ticket prices for the rich patrons are too high and the upscale extras are too scarce, the rich can more easily depart for another amusement park with better amenities.
But the Guardian would have everyone more concerned that the park’s poorer visitors can’t afford the park’s luxury amenities and assume that this is a great injustice to be fixed by charging the wealthy more at entrance without any noticeably better attractions. The article (as well as the underlying report) takes the measurable statistic of dollars per person and imposes moral values on the numbers. It then assumes there is a fix that is both simple and desirable. The unsupported assumption is that because you can measure something, you possess special insights about what outcome is wanted and how to achieve it.
I am troubled by the degree to which UK news organisations have become involved in covering US matters.
Hi
I knew it was silly to think we might actually be talking about states with actual cool amusement parks, like we have here...lol...
Not commenting on the piece, positive I would be the minority and just trying to avoid arguments and fights as much as I can
Normal winter day here, mid 30's, cloudy.
Yeah, I hate to have to leave, but, it just isn't as fun/friendly as it used to be...sigh