Red State Blue State, Poor State Rich State
Much has been made of the apparent contradiction that the richer states tend to be blue, while richer individuals tend to vote red. For example, E. J. Dionne goes on about this in today's Washington Post.
The resolution of this paradox is obvious. Rich people tend to vote for Republicans, but states where people tend to vote for Democrats tend to get richer as a result of Democratic wealth building policies. If you study the history of the income tax in the United States, there is nothing like an income tax increase to make everybody richer. Consider the 1870s boom (Civil War taxes), the 1920s (WWI taxes), the 1930s and to a greater extent the 1940s (WWII taxes), and the 1990s (the Bush and Clinton tax increase).
Why does it work? That's easy. It was all worked out in the 1930s. Rich people spend less of their income than poor people. That's why they are rich. If they spent more, they would no longer be rich. Rich people are smart, and have figured out how to efficiently provide goods, services and organization for poorer people, and they take their cut. Unfortunately, they just don't spend enough, so this kind of system tends to run down as poor and middle class people get spent out.
If the government taxes rich people, and spends the money, then a good bit of it goes to the undeserving poor and middle class, and they spend it. The rich get richer. The poor get richer. The middle class gets richer, and tax revenues continue to increase. Then, someone gets the idea that budget surpluses are a bad idea, as happened in the mid-1920s and the start of this century, and there comes a tax cut, and then the economy slows down and the surpluses go away.
This works on a state by state basis, as well as at a national level, so you get states with disatrously high taxes and robust economies, and states with good solid, pro-business tax systems and economies barely limping along on federal handouts. If you started out with a bunch of states and had a big election, you'd always get the richer folks wanting to cut their taxes. Where they got their wish, the state economy would lag in growth. Where they got shafted by higher taxes, the state economy would grow briskly. Since most voters aren't rich, you'd see the pattern you see today. Blue states are rich, red states are poor, even though rich people tend to vote red and poor people vote blue.
The resolution of this paradox is obvious. Rich people tend to vote for Republicans, but states where people tend to vote for Democrats tend to get richer as a result of Democratic wealth building policies. If you study the history of the income tax in the United States, there is nothing like an income tax increase to make everybody richer. Consider the 1870s boom (Civil War taxes), the 1920s (WWI taxes), the 1930s and to a greater extent the 1940s (WWII taxes), and the 1990s (the Bush and Clinton tax increase).
Why does it work? That's easy. It was all worked out in the 1930s. Rich people spend less of their income than poor people. That's why they are rich. If they spent more, they would no longer be rich. Rich people are smart, and have figured out how to efficiently provide goods, services and organization for poorer people, and they take their cut. Unfortunately, they just don't spend enough, so this kind of system tends to run down as poor and middle class people get spent out.
If the government taxes rich people, and spends the money, then a good bit of it goes to the undeserving poor and middle class, and they spend it. The rich get richer. The poor get richer. The middle class gets richer, and tax revenues continue to increase. Then, someone gets the idea that budget surpluses are a bad idea, as happened in the mid-1920s and the start of this century, and there comes a tax cut, and then the economy slows down and the surpluses go away.
This works on a state by state basis, as well as at a national level, so you get states with disatrously high taxes and robust economies, and states with good solid, pro-business tax systems and economies barely limping along on federal handouts. If you started out with a bunch of states and had a big election, you'd always get the richer folks wanting to cut their taxes. Where they got their wish, the state economy would lag in growth. Where they got shafted by higher taxes, the state economy would grow briskly. Since most voters aren't rich, you'd see the pattern you see today. Blue states are rich, red states are poor, even though rich people tend to vote red and poor people vote blue.
posted by Kaleberg at 12:38 PM
1 Comments:
OT: Thanks for the comment on the "Jane Bond" thread, K.
It took a lot of effort to research and think through, so it was a terrific disappointment when it seemed to be scrolling off into oblivion without notice.
Your thanks are warmly appreciated. :-)
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