This morning, I happened upon an article in my local paper which "reports" how revenue growth from taxes in Connecticut is stagnant as a result of income inequality. Now the local paper, a Hearst property, is one of the more biased outlets in the media; it is more a cheerleader for the Democrats at all levels than a purveyor of news, but even for these people, the story was amazingly distorted.
The real story is that the Connecticut economy is stagnant; over the last four years, we have one of the lowest growth rates of any state in the country. Wages have not risen and the number of jobs in the state have also failed to grow. As a result, tax revenues from both income and sales taxes have not grown at the rates previously seen. That is no surprise; the bulk of all taxes come from the vast middle income group. If the middle income group is facing stagnant growth or slight declines in income, then the amount of taxes this group pays also are stagnant or slightly declining. Income inequality has nothing to do with it. Policies that actually get the economy to grow would be much more important for raising state income (and personal income as well) than any lament about income inequality.
Despite reality, the report blamed income inequality for stagnant state tax revenues. The reporter explained that the richest people "spend less" than everyone else, so sales tax revenues suffer from inequality. Not quite. What the reporter should have said is that the richest people spend a smaller portion of their income than everyone else. Someone who earns a million dollars a year may spend half a million or 50% while someone earning 50,000 dollars per year may spend it all. The sales tax (at 6%) on the rich person, however, is $30,000 while the sales tax on the middle income person is $3,000. That means MORE state tax revenue, not LESS. State income taxes are also higher, not lower, on those who earn more.
So how could the reporter get this so wrong? First, you need to remember that the big talking point for the Democrats on the economy for the last two years has been income inequality. The view of the Democrats has been that the rich have too much. To a great extent, that view has been pushed by the Democrats because the truth is that the middle income people have too little as a result of the policies followed by Washington and Hartford. They needed someone to blame (other than themselves). Thus, the story as written plays right into the regular narrative of the Democrats even though it is nowhere close to true. Second, we have to conclude that the reporter (from the AP) does not really understand what he is writing. Even a small amount of critical thinking would have uncovered the total distortion of reality in the article.
Oh well.
The real story is that the Connecticut economy is stagnant; over the last four years, we have one of the lowest growth rates of any state in the country. Wages have not risen and the number of jobs in the state have also failed to grow. As a result, tax revenues from both income and sales taxes have not grown at the rates previously seen. That is no surprise; the bulk of all taxes come from the vast middle income group. If the middle income group is facing stagnant growth or slight declines in income, then the amount of taxes this group pays also are stagnant or slightly declining. Income inequality has nothing to do with it. Policies that actually get the economy to grow would be much more important for raising state income (and personal income as well) than any lament about income inequality.
Despite reality, the report blamed income inequality for stagnant state tax revenues. The reporter explained that the richest people "spend less" than everyone else, so sales tax revenues suffer from inequality. Not quite. What the reporter should have said is that the richest people spend a smaller portion of their income than everyone else. Someone who earns a million dollars a year may spend half a million or 50% while someone earning 50,000 dollars per year may spend it all. The sales tax (at 6%) on the rich person, however, is $30,000 while the sales tax on the middle income person is $3,000. That means MORE state tax revenue, not LESS. State income taxes are also higher, not lower, on those who earn more.
So how could the reporter get this so wrong? First, you need to remember that the big talking point for the Democrats on the economy for the last two years has been income inequality. The view of the Democrats has been that the rich have too much. To a great extent, that view has been pushed by the Democrats because the truth is that the middle income people have too little as a result of the policies followed by Washington and Hartford. They needed someone to blame (other than themselves). Thus, the story as written plays right into the regular narrative of the Democrats even though it is nowhere close to true. Second, we have to conclude that the reporter (from the AP) does not really understand what he is writing. Even a small amount of critical thinking would have uncovered the total distortion of reality in the article.
Oh well.
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