Wisconsin’s Rising Wealth Gap
In the last decade all $4.8 billion in income gains went to the wealthiest 20 percent. All boats aren’t rising.
In the world according to Scott Walker, the solution for Wisconsin’s people is simple: we need more jobs. It’s the standard prescription of many conservatives and even some liberals. As we improve the economy and increase jobs, a rising tide will lift all boats. Everybody will be a winner.
But there is increasing evidence that America’s post-1970s economic system is only allowing some boats to rise, and the problem can be seen in every state, from California to Mississippi to Wisconsin.
A recent and alarming report by the Center on Budget and Policy Priorities finds that income inequality is rising in every state. “Across all states, the average income of the richest fifth of households was eight times that of the poorest fifth as of the late 2000s,” the study noted
The study looked shorter term, from the mid-1990s to today, and longer-term, going back to the late 1970s, and found that inequality has steadily worsened. No state saw a greater rise in inequality than Connecticut since the late 1970s: income there grew 110 percent for the richest 20 percent of people while falling 4 percent for the poorest 20 percent.
Wisconsin’s inequality grew at about half this rate, the study found. Indeed, Wisconsin ranked better than 44 states — with the sixth lowest level of income inequality. Still, it is stunning to see how drastically things are changing here. An analysis of state Department of Revenue data by the Center on Wisconsin Strategy found that between 1996 and 2010, the bottom 40 percent of income earners in the state saw their income drop by $2,407 while the richest 1 percent saw their income rise by $168, 773.
Between 2000 and 2010, the incomes of the top 20 percent of Wisconsinites rose by a total of $4.8 billion while the incomes of the bottom 80 percent of Wisconsinites dropped by $4.8 billion. All of the gains of that decade went to the wealthy, an analysis of Department of Revenue data by the Wisconsin Council on Children and Families found.
It’s not that people are unwilling to work. Even people at the very bottom are. A recent report by the UW-Milwaukee Employment & Training Institute was instructive in that regard. ETI looked at single parent-headed households in nine central city zipcodes with some of the highest poverty in Milwaukee and found that work ethic thrived in the face of the Great Recession. From 2007 to 2011 the “number of of inner city single parents filing state tax returns… declined by only 5% during the economic recession with many parents remaining in the workforce in spite of low wages and often intermittent employment.”
These are people saddled with some of the lousiest-paying jobs heavily concentrated “in child care centers, hospitals, department and discount stores, restaurant and food service establishments, and nursing homes. Many of the jobs in these sectors have variable or irregular hours and seasonal swings in employment,” the study noted. Yet the workers continued to toil away.
Meanwhile, the percent of families with “middle class” income (i.e., above 185% of poverty) in these zip codes dropped from 19% in 2007 to 15% in 2011, the study found.
Tommy Thompson
One bipartisan solution to the problem of the working poor, created under Gov. Tommy Thompson was the creation of the state earned income tax credit, which gives a tax credit to those whose wages are not enough to lift the family out of poverty. But Walker and the Republicans slashed this credit in the first biennial budget they passed. The result has been “a dramatic and devastating impact on some of the lowest wage, single working parents,” as ETI director John Pawasarat noted. The average single parent family saw its tax credit drop by 23 percent, the study found.
Given the American economy’s inability to deliver gains for most workers, liberal groups like the Center on Wisconsin Strategy are calling for mechanisms to modulate the impact of a winners-take-all-the-gains economy: liberal use of the earned income tax credit. More progressive taxation. (The wealthy in Wisconsin actually pay a lower percent of their income in state/local taxes than any other groups). Increase the value of the Homestead Tax Credit, which hasn’t been increased since 1991 and has dropped greatly in value. Better legal protection of efforts to unionize. Raise the minimum wage and index it to inflation. Protect and fully fund Badger Care health care and the Wisconsin Shares child care subsidy program. And build the skills and education of Wisconsin’s workforce.
Those are are all mechanisms that deserve discussion. But perhaps the biggest problem in the American economy is the obscene increase in pay for corporate executives and other top dogs in the executive suite, while average company workers see little or no increase in wages. There has been talk of federal reforms to address this issue, but little has been done to date.
Murphy's Law
-
National Media Discovers Mayor Johnson
Jul 16th, 2024 by Bruce Murphy
-
Milwaukee Arts Groups in Big Trouble
Jul 10th, 2024 by Bruce Murphy
-
The Plague of Rising Health Care Costs
Jul 8th, 2024 by Bruce Murphy
Evaluating a tax plan should begin with the admission that our $1.3 trillion in annual tax expenditures (credits, deductions and other loopholes that reduce tax revenue) are the equivalent of spending programs imbedded in the tax code. Each of the approximately 250 adjustments to tax liability causes one group to increase their wealth at the expense of another. Between 1995 and 2010 the top 10% increased their wealth by 10%, the next 40% (-the middle class) lost 8% of their wealth and the poorest half of the population sustained a devastating loss of 70% of their net wealth. Consider also that the lower half the country shares only $584 billion in net wealth – an amount which is less than half the tax dollars redistributed to high earners and business each year. Our growing wealth gap, long term unemployment and poverty are foreseeable results of a tax code that encourages prosperity only for the top 10%.
See the latest wealth distribution chart at TaxNetWealth.com
You don’t get it. RICH PEOPLE CREATE JOBS.
And the richer they get creates MORE jobs.
There are two gardener’s, a pool guy, a forester, a cleaning person, cook, personal shopper, dog trainer, personal trainer, yoga instructor, interior decorator, and art consultant at my parents Long Island compound . I know, I missing a few. Ah, there is a security service and the reverse osmosis filtration system that requires a lot of maintenance. Now that I think of it, this list doesn’t include traditional lawn and child care. Their putting green requires a specialist as does their orchids. Did I mention the party planner, the organic bee keeper, and the guys who keep their entertainment center and salt water fish tank up to snuff?
I can’t tell if Stacy is being sarcastic or not?
When a rich person’s income goes up by 3,000% they don’t hire 3,000% more people or pay them 3,000% more. It’s even close to linear. Reaganomics have been proven a failure so long ago it gets tiring having to point it out.
That Center study is a left wing nut case group, there are far better sources. Best figures that I have seen came from Ed Howe, former head of aurora that showed that our taxes have driven 7500 big income people out of the state while attracting 145,000 tax eaters.
We need the 1%, Texas and Fla. sure like them. and the seniors that do not use much in the way of resources to come back.
If you think any of them will come abck or saty with these dingbat proposals forget it.
My parents, never made more than $18,000 in his life retired in Texas cause he had $5,000 more per year to spend cause of lower property taxes and income taxes.
The Liberals had 8 years to do their magic and improve incomes int his state and they failed. They failed miserably in improving education, reading scores are at their lowest plus University education costs are at their highest.
We have spent hundreds of billion dollars on welfare programs and all we get is more poor people. We need to develop programs that give kids jobs and a future, not a future of being on the dole.
Consider the other story in this issue regarding the new apartments in the Haymarket area/district and how paying for their construction is aided by tax credits. In addition, we have programs which aid businesses who create jobs with tax incentives like TIF’s etc. What seems to be missing is any regular, long term tax support for a transportation system to enable people to get from those apartments to those jobs. Shouldn’t that be part of the solution to enabling people to move (pardon the pun) from low income jobs to higher income ones? And the failure to recognize that infrastructure modernization creates jobs just as much as defense spending seems to be also missing. Income distribution is a factor of wage scale distribution that is where jobs with good wages are distributed income is also, I think (sort of a goofy way of saying it but I hope you understand).
Interestingly, this increase in inequality has happened as there has been a massive increase in means-tested welfare programs, and in welfare dependency.
Could it be that increasing dependency increases inequality, as dependent people are trapped at the bottom of the ladder? That has to be a large part of the picture.
John, you’d need to address that fact that inequality has increased up the entire ladder, not just for poor people. When 80% of the population in Wisconsin sees no gain in income 0ver ten years while the top 20% see a $4.8 billion gain that’s not about a problem of welfare but about wages not keeping pace.
Comments on this article illustrate one of the main causes of this phenomenon: half the population has been utterly and completely hoodwinked by politicians to vote against their own self interest. A simple, perfectly factual statement such as “the incomes of the top 20 percent of Wisconsinites rose by a total of $4.8 billion while the incomes of the bottom 80 percent of Wisconsinites dropped by $4.8 billion” can be merely brushed aside with responses such as “That Center study is a left wing nut case group.” The end. And that commenter finds no irony in identifying the poorest among us as those “on the dole” even having just read that those poor are getting poorer and the rich are getting richer. Yes, the corporate propaganda machine, which includes both (D) and (R), has been very successful indeed.
Bruce – I love ya, but your opening is an unnecessary shot at Gov. Walker, as if to suggest his quest for more jobs is a bad idea, or somehow hampers the poor.
Suggesting that the 23% drop in the Wisconsin earned income tax credit had “devastating impact” on anyone is pure fluffery. You know how much the cut in the WI EITC credit was? At the high end it was cut $300, $30 at the low end of the credit before it phases out. Sure, an extra $300 in a year would buy a few groceries .. a job would improve their situation far more.
I mean, come on. Can’t both sides agree on something .. like, we need more jobs? Sheesh.
Additionally, income inequality will continue to rise, period. Our economy is changing away from low-skill to medium- and high-skill jobs. Those that don’t prioritize education, and/or make poor life choices are doomed, and will be moreso in 10 years, in 20, in 50.
Even if you accepted their very questionable figures we do know that when you subsidize poverty you are going to get more of it. We do and We have.
One can lay out all of the programs for a woman with two young children and it is almost the same as $35,000 per year, so there is little reason for most people to fight their way out.
One thing that no one wants to ask is why are the people on the top making more? WE do not have any oil, diamonds. natural gas, long time wealth so where is it coming from??
The only place that we have had any growth in the last 30 years, since Kimberly Clark took off, is the small businesses, so sure, let us take away some of their money and give it to someone else.
“if you take money from the productive and give it to the non-productive you get less productivity from both.
This discussion is unspeakably sad. The Republicans and their supporters say they want one thing, then do another. Create jobs? First our esteemed governor blocked wind energy to please his rural realtor donors. Then he killed high speed rail to please his highway lobby. Then his minions killed the income tax credits, took money away from the schools. And Gale Klappa, WEnergy’s $16 million man, raises rates for green energy. And where is the J-S on this? Collecting revenues from political ads and dishonest talk radio. Now, we have a class of paid punks parroting Heritage talking points. What can honest people do when the country is going to Hell in a hand basket?
Another Bruce
Regarding the article by Bruce, and oddly enough, another perspective on Dohnal’s comment about taking money from the productive and giving it to the non-productive, please read this: http://www.washingtonpost.com/opinions/harold-meyerson-most-us-taxpayers-lose-out-on-fiscal-cliff-deal/2013/01/08/51d24bd8-59c5-11e2-9fa9-5fbdc9530eb9_story.html?wpisrc=nl_opinions
One of the things I noticed in these comments is an overwhelming consensus that if you are receiving benefits you don’t have a job and all you need is a job and you would no longer need the government assistance ( the dole as one person called it ). I imagine that is a huge misconception among people who’ve never had to experience life at the bottom of the food chain. Please do the math for yourselves and make a mock budget to have it hit home, 40 hours a week at minimum wage, take out the taxes and then try to provide for yourself or your family with what’s left. It’s simply not possible. Even the cheapest 1 BR home would barely leave enough for food and transportation costs for one person. Even a 2 income family of three will have a hard time moving forward if the jobs are just minimum wage. That’s the point made by this article and the numerous studies about the income inequality in this country and how it’s growing. Executive pay is rising by leaps and bounds and the minimum wage simply isn’t rising. The biggest fallacy of the Reagan administration was that if you let the wealthy keep more money they would pass their tax savings on to others with job creation. In reality, what we did was legislate greed and made profit the priority. Look at it another way, it’s not whether or not X number of jobs were created because if they were all minimum wage positions you would need more than one to pay the bills and now you’ve effectively cut the number of new jobs in half if everyone needs two. Are you willing to work twice as long for the same level of pay (or less)? If both parents have to work two jobs each to come close to that american dream of buying a home and taking care of their kids, when will they have time to see the kids? Have you checked out the costs of daycares?
Higher taxes alone won’t solve our country’s problems the same as higher taxes on the wealthy will not kill the economy. The wealthy will not stop investing because they only get 5% return instead of 7% and as proof, please look at the economic growth of the 50’s and what the tax rates were for the top earners. 92% was the top tax rate. Earning an extra $100,000 in pay per year only yielded an $8,000 take home. Not that much incentive to grab all you can which left more for others to boost themselves with and the middle class SOARED!
It is funny seeing some of these arguments referring to the bottom quartile as being system leaches. When was the last time the Federal minimum wage was increased? Read the article attached below for a nice synopsis but a large bump in the minimum wage would have large scale stimulus style effects while not requiring the government to pass any type of stimulus bill. The effects on Medicare/Medicaid and Social security would be a large boost in payroll tax collections. The savings rate for the lowest earners is essentially negative so you would see a large bump in consumption.
http://www.theamericanconservative.com/articles/raising-american-wages-by-raising-american-wages/
It is always interesting to watch the debate over Min. Wage. We have unemployment n the inner city for kids at 57% and the Libs want to make mor expensive to hire these kids. the Liberals are screwing their own constituents.
If we fly around and throw more money out of helicopters like we did in 2009 we might just stimulate demand but in the long run will it create any jobs or any long term benefit??? See what happened in Detroit and do the opposite.
toss out this bunch of community leaders that sem to be interested in east side art projects and do not care that we chase companies out of Milwaukee and cannot teach any kids to read..
Enabling companies to create jobs, it is well known that we have to have a different environment than we have in Milw cty. You want more jobs and more companies? See what Texas is doing.
eight years of Doyles failures, companies and jobs leaving is going to take years to overcome. In 8 years the “education governor”, Doyle did not do one thing to improve th elots of the kids, just the educrats. Higher salaries, more administrators, more bennies and no books for the kids.
Yes, please look at the jobs created in Texas. The majority were minimum wage jobs trying to replace higher wage jobs that had moved elsewhere. Please re-read my post again, I think I covered the aspect of living on minimum wage quite clearly. As to making it more expensive for inner-city kids to get a job please do some research. Even McDonalds doesn’t pay minimum wage and all I can really say is you must be too young to remember another of Reagan’s failed economic policies, the separate minimum wage for teens which was 2/3 of the then minimum wage. The end result? Companies who could get away with it fired their adult workforce and replaced them with cheaper teenage labor. Sound familiar? Offshoring perhaps? A company will absolutely cut labor costs any way they can to maximize profits for shareholders. Unfortunately, not too many companies seem to understand that by decreasing the amount they pay their workers it has a ripple effect on the rest of the economy. Henry Ford knew this when he voluntarily paid his workers $5 a day at a time when most people were making that in a week. The higher taxes of the time didn’t seem to dissuade him from creating jobs.
And please, don’t try to bring education into this. As a country we have barked loud and often about how important the children are, no child left behind, it takes a village, etc etc. BUT, when budgets are tight, the first thing to get cut is education. Our standings in education worldwide have slipped while we once again claim something to be vitally important, that is until the bill comes. If you really feel that teachers are not worth their salary, take their job for a day. The biggest reason teachers are able to get student loans forgiven is because even the lending institutions agree teachers don’t make enough money.
Mark, you are so full of it, ask the Kimberly Clark people and those that are expanding in Texas. Oil jobs do not pay min. wage. In education, in Wi. e have raised spending 5 times the rate of inflation and our scores have gone down. any more spending in education foes right into the pockets of the educrats, the kids do not get anything. we saw the effects of 8 years of Liberal control under Doyle. Spent more money, more debt and lower scores for the kids but bigger salaries for the union people.
I would love to put more money in education as soon as they show us how they are going to improve scores going down.
Dohnal, using Texas’s growth in jobs in the Oil field are rather nice, but not really relevent when discussing a state that has little in the way of fossil fuel. The largest sector of growth has actually been in State and Federal government. Year old but pertinent…
http://www.factcheck.org/2011/08/texas-size-recovery/
Let me ask you something Dohnal, would you blame the 75% of adult American’s who have $30,000 (or less) set aside in retirement income as being lazy, profligate spenders leaching off the government? Or do you willfully ignore the decoupling of wages from inflation for most American’s since the 1970s?
John, when did you stop beating your girlfriends, that is what your discussion points are like.
Oil is just the one that I threw out.
Show me how the rise in min wage has helped the kids in Milwaukee? More Jobs? better reading scores? Facts are funny, they are just there.
You threw out Texas, which has had job growth with the majority of the middle class jobs created coming from Oil, the remainder low wage and government.
I asked you a question as I am trying to get a handle on where you are coming from, as it seems you mimic alot of the flawed talking points that shills like Mankiw spill. Milwaukee Public Schools biggest issue is that a large percentage of the attendees come from single parent households, or poverty level households or a combination of the two. If you fail to see how poverty impacts the family structure and how that might impact public schooling then I suggest you spend some quality time reading the myriad of material out there and accompanying statistics which discuss this in detail.
Real easy 2 digit numbers for you to pour over. Note the highest rates of single parent households are also with the highest percentages of those living in the poverty levels.
http://m.countyhealthrankings.org/node/3223/82
The only county higher than Milwaukee happens to be the largest Indian reservation in Wisconsin.
When Rick Perry was running for the nomination he proclaimed 100,000 new jobs in Texas. The fact checkers investigated and reported most were minimum wage positions. No, oil jobs don’t pay minimum wage but a lot of places still do. I’m not going to defend Doyle or his education policies, partly because parents have more responsibility for the education of their children than any government should and if they don’t take an active role than no amount of money thrown at it will solve the problem of why Johnny can’t read. Another reason I won’t defend Doyle is because education should be non-partisan. It shouldn’t matter if you’re conservative, liberal or anywhere in between, either your ideas for reform work or they don’t and you try something else. I personally believe in a year round school year and longer hours because our model is based on the agrarian society we once were where child labor was needed on the farms in the summer. Outside of that, scores are not going down because kids are dumber or teachers are worse or the books/classrooms/technology are out of date. Scores are going down because of the lack of parental involvement and that doesn’t matter if your rich or poor, if the parents don’t care, the kids won’t. However, that is far off topic from the income inequality gap that not only exists but is growing at a faster rate. The reasons for this are numerous and sometimes subtle ranging from the Super Size My Paycheck mentality of executives who think they deserve all the credit to seeing employees as an expense instead of an asset. We have carefully cultivated a culture of greed and instant gratification for the masses in this country in the last 35 years where your successes are all because of your own hardwork and determination and your failures are because someone held you back. I say for the masses because greed in business has always been present in this country and as examples you can no longer work a 12 yr old girl for 15 hours a day in a locked factory making clothes for pennies an hour, well at least not legally, but you could at one time. The W. Virginia coal miners whose strikes gave us the term Redneck weren’t striking because the coal companies weren’t making any money. Our government has had a hand in shaping some of that greed, or I should say lobbyists have had a hand in having the government shape that greed. Tax breaks all over the place that are used by a fairly small percentage of people who make more than enough to not need the tax break (or should we call it a subsidy?) Lower tax rates, personal and business, than most of our allied industrial nations in Europe and we should all be afraid that if we raise rates, those millionaires will flee the country like rats fleeing a sinking ship. In the end, this topic is quite similar to global warming, you can feel its getting hotter but you don’t want someone trying to blame it on you so you disagree it’s happening.
Dohnal, I’d like to close with a repeat of one of your quotes but a different viewpoint. ““if you take money from the productive and give it to the non-productive you get less productivity from both.” Now, just consider the employee as the producer/productive and the high paying execs as the non-productive. I think that really sums up the situation at hand.
Jeez I love to hear Libs whine. texas has been the most successful state in th elast 20 years, do you really think that they added all those Mcdonalds. Everyone is fleeing Ill. and Ca. to go to Texas.
The Liberals have been crying about the problems that they can’t solve in education for 40 years, well if you can’t solve them get the hell out and let someone else try. Liberalism and Tom Barrett has failed Milwaukee and all you guys can do is whine.
All of the big cities, starting with Chicago, are becoming wastelands. Detroit has lost 50% of it’s population.
And yes, you can teach poor kids, they do it in China, Japan after the war, India and “Watch waiting for Superman”, they do it n this country.
If all you can do is give halfassed excuses why you can’t do something than get out. We don’t need you. You Libs have hundreds of thousands of poor kids a good chance at life, while walking away with Cadillac salaries and bennies. Two pensions, who else has that????.
I was hoping I wasn’t wasting 5 minutes of my time, but I clearly was.
Thank you Dohnal for taking a somewhat respectable discussion from differing viewpoints and turning it into a name calling partisan piece. I am neither Liberal nor Conservative, I do not whine, I simply lay out facts and use generalizations to make my point. I did not see a single fact in your last post. By what measure is Texas the most successful? Would that be in GDP, Population Growth, Smallest state budget deficit? And no, of course there weren’t 100,000 jobs created by McDonalds alone, you would also add in any other fast food restaurant chain, mall department store, pizza joint, office cleaners and other unskilled labor positions. The fact remains that the majority of new jobs in Texas are low wage positions.
I’m not particularly interested in discussing Milwaukee politics, don’t give a hoot about Tom Barret and large cities are dying because they were large scale manufacturing centers and we’ve lost most of our manufacturing base that supported those large populations. Detroit is the perfect example because it’s downfall is directly related to the 70’s arrogance of the auto industry that the city relied upon for its tax base which it promptly mismanaged through greed which goes back to my very first post!!
And if you see a rank and file teacher driving a Cadillac, they’re probably married to someone who makes twice what they do. If you drive by a school parking lot filled with beemers and caddies it’s either a private school or the student lot. The ones with the hella bennies are elected officials who only need to be elected once to get a full retirement package that would best more than 90% of the population. Imagine that, work possibly 2 years and you can retire. Even if your a Republican.
I love that Bob Dohnal’s whine about education is the most poorly constructed and worst punctuated comment in this thread.
If you ever doubted that discussions of the fiscal who has and who does not in our society, is part of the class war, the above fame throwing will assure you it exists.
The functional elimination of the progressive tax system in our tax structure was essentially ended n the 80’s after the election of Ronald Reagan.
The demise of the labor movement occurred almost simultaneously, as it became possible to off shore many jobs, but particularly entry level jobs.
Much of the impetuous for this was, what is now generally observed as the failed, “Supply Side” economics theory.
The history of the rise of conservatism in this country and the success of turning the working class into social issue warriors would be a book in itself, if not many books.
With the labor movement weak and the tax system turned upside down, (Lower rates for investment income), the rich get richer and the poor are getting not only poorer, but more numerous.
Please note that the rich do not create jobs. They sign the checks, but only after the demand for goods and services require companies to hire people in order to provide those products. so the fallacy of giving the money to the rich so they can wisely decide how the ‘Invisible hand of the market” will dispense with the profits is just wrong. A relic of the also failed Social Darwinism concept of the gilded age.
The sadist part of all of this is the unwitting complicity of the once strong middle class. by voting and acting against their own self interest for years. Slowly, the realization is creeping in, that the land they bought is a swamp and the EPA won’t let them fill it in.
We have to realize, every person we elect is a tax and spend politician. That is their job. Who they tax and how they spend it is the issue.
Very well put Jeff.
The income gap is rising in high tax states for the simple reason that middle income families can significantly improve their standard of living by leaving a high-tax state and seeking employment in a low or no tax state. This is exacerbated by the fact that federal tax rates are set to rise for most people. Eliminating 5-13% state taxes before deductions is meaningful for many people. The people left behind in high tax jurisdictions tend to be very wealthy or very poor at the margin – thereby increasing the wealth gap. We live in a very high tax state and have observed these behaviors consistently.
Mike’s comment ignores disparities in levels of service. It is as if low taxes were the only consideration which cause migration. If that were true, we could expect a massive migration of Scandinavians to the United States! Some people might prefer levels of service found in the South and Southwest, but they might miss the public amenities such as schools and public health services. Alas, a number of Republicans seem to accept this faulty assumption. Maybe it would be better for all of us if they went South rather than degrading the quality of life for Wisconsinites…..
Your response smacks of down home country cookin’ platitudes that sound good on paper but are woefully out of touch with reality. Income inequality has increased dramatically in the entire United States. If your over simplification had any truth to it, we might see lower income inequality in lower taxation states. Please refer to this nice and easy to understand graphical map. It actually is the exact opposite of what you are saying specifically.
http://thinkprogress.org/economy/2012/11/15/1197011/income-inequality-state-report/?mobile=nc
Also note that the darker colored states on the whole are the beneficiaries of more Federal subsidies than the lighter colored states. So in other words, more of your Federal income tax dollars are going to these same places.
Additionally, places like Tennessee and South Carolina which have seen large growth in Manufacturing jobs have substantially lower costs of living and lower wage bases.
If you wish to peruse the state corporate income taxes, here you go:
http://www.taxadmin.org/fta/rate/corp_inc.pdf
That’s a good point Bruce and I’d like to expand on that by mentioning that it would be misleading to say higher state taxes make or break people’s plans to move elsewhere unless you were strictly talking about the retired. Employment and cost of living play a bigger part of that decision. I don’t think too many people would leave a $100k a year position where the state taxes are higher to move to a state where the taxes are lower but you can only find a job making $60k a year. I’m originally from Arkansas where the cost of living is very modest and the taxes are fairly low but there’s lots of reasons for that. One is the much lower paying jobs. As an example, I left Arkansas for a position in a similar sized town in another state and performing the same work yet I was able to realize a nearly 50% bump in pay. Yes, someone in California may complain about the high taxes they make on their high salary but they’re not likely to move elsewhere if the money lost on the salary is greater than the savings on taxes. Other factors would play a more important role in that decision.
This discussion reminds me of a poll I saw years ago. It was aimed at discovery why some people were successful entrepreneurs and others were not. One question in the survey was what was the single most important factor determining success of a business. The unsuccessful entrepreneurs came up with an extensive list (a good business plan, adequate financing, business experience, loyal and skilled employees, cheap rent, etc.). The successful entrepreneurs’ answers boiled down to a single one: customers. With customers who want and can pay for your product all other problems are solvable; without them, the other issues are irrelevant.
When someone describes wealthy people as “job creators,” I think they have it exactly backwards. Customers are the job creators. And the growing wealth gap threatens a healthy economy by reducing the number and buying power of the customers.
Agreed. US GDP is something like 70% consumption. With a savings rate sub 3% the last decade (and zero or negative in the boom years), but a large growth in net worth for top percentiles over the last decade, for the savings rate to be as low as it is means most people are spending every last dollar they have or in some cases using debt to supplement.
One of the impacts on the wealth gap issue in America over the past 20 years that should be considered is that of the internet. The internet enabled far more liquidity in the labor market. Global manufacturers were able to access and manage large pools of cheap labor in places like China. Low fuel costs up until the mid-200s enabled cheap shipping. But the phenomenon goes well-beyond labor. Companies have set-up tax and legal structures that maximize profit as well. These operational, legal and financial structures can be managed real-time as never before. U.S. state and local governments strike me as being very slow to react and adapt to a competitive environment that changed very quickly. It is very competitive and states would do well to lower costs in any way they can to promote the formation of capital and attract new businesses. For businesses looking to add capacity, taxes should be viewed as a cost. Some states are higher and some are lower. In this world Wisconsin competes against Tennessee which competes against Texas and so forth on a scale not seen before.