A recent article by Katherine Newman, a sociology professor at Johns Hopkins, highlights the effect of rising tax rates on the poor. She points out that for the past 30 years or so, many states in the South and the West have been raising sales taxes and fees for government services, both of which especially affect the poor. States in the Northeast and Midwest, on the other hand, have generally been more progressive in their tax policies, some even going so far as to create local versions of the federal Earned Income Tax Credit, which is specifically designed to assist people who don’t earn much money.
According to Professor Newman, the result of these policies, after correcting for other variables, like the local poverty rate, racial composition, diet and cost of living, is that there is a clear relationship between taxing the poor and “negative outcomes”, such as heart disease, infant mortality, dropping out of school, divorce, property crime and violent crime:
“The poor of the South — and increasingly the West — do worse because their states tax them more heavily. They have less money to buy medication, so their health problems get worse. High sales taxes make meals more expensive, so they shift to cheaper, unhealthy food. If people can’t make ends meet, they may turn to the underground economy or to crime.”
Partly for this reason, Southern and Western states receive more than their share of the federal budget (it’s not just because they have lots of military bases):
“Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net. Consequently, the Southern states reap more dollars in federal benefits than they pay in taxes (like Mississippi, which saw a net gain of $240 billion between 1990 and 2009), while the wealthier states — which do more to take care of their own — lose out for every dollar they pay (like New Jersey, which handed over a net of $706 billion over that same period)… We all pay for the damage done when states try to solve their fiscal problems, or score ideological points, on the backs of the poor.”
And yet the situation is getting worse, as states like Louisiana, Nebraska and North Carolina consider cutting income and corporate taxes, while raising sales taxes.