Democrat policies hurt the poor, and actually increase income inequality

Two articles from Investors Business Daily. The first discusses how big government tax policies actually encourage poor people not to work. The second one looks at major cities, and finds that 9 out of the top 10 cities with the most “inequality” are run by Democrats.

Let’s start with the first article.

It says:

The nonpartisan Tax Foundation has put out a new report titled “Income Tax Illustrated .” OK, cue the jokes. But it isn’t boring. Really.

[…]”As low-income households earn more money, not only do their tax burdens grow rapidly, but they also receive fewer benefits from federal social assistance programs,” the report said. “In fact, individuals who move to higher-paying jobs sometimes end up with less overall disposable income, after taxes and transfers.”

The report uses two examples, as noted by the Washington Beacon. In one, a single parent earns $4,800 in salary before taxes. That’s not much, but because of entitlements such as Medicaid, Temporary Assistance for Needy Families, the Children’s Health Insurance Program, food stamps, and Housing Choice Vouchers, that person’s take-home pay for the year jumps to $22,090 — not a lot, granted, but it’s more than 4-1/2 times greater than what that person actually earned working.

That compares to someone who earns $21,000 before taxes but, because of taxes and entitlements, takes home $24,057 for the year.

Yes, that person earns $16,200 more from work, but takes home just $1,967 more, thanks to the tax code and generous benefits to those with less income.

“As low-income households earn more money, not only do their tax burdens grow rapidly, but they also receive fewer benefits from federal social assistance programs,” the report said.

“In fact, individuals who move to higher-paying jobs sometimes end up with less overall disposable income, after taxes and transfers.”

[…]Believe it or not, this bizarre distortion gets worse when you consider a married couple with two kids.

Because the Earned Income Tax Credit is phased out at higher incomes, a family of four making $48,000 faces a marginal tax burden of 43.7% — an absurd disincentive to work harder and earn more for families.

When Republican presidential candidates like Jindal, Cruz and Rubio talk about simplifying the tax code, their intent is to solve these perverse incentives that keep poor people dependent on government. We have make changes to the tax code so that people who are able to work can do better by working, rather than by not working. Republicans are in favor of encourage people to work, marry and have kids. Democrats… just want them to keep voting for dependence on big government.

On to the second article.

Which states have the most income inequality?

The Washington Post looked into the numbers and found that 5 of the top 7 states are decidedly blue — New York, Connecticut, California, Massachusetts and Rhode Island.

And Washington, D.C., which is ground zero of big government liberalism, has the highest level of income inequality of all.

At the other end of the spectrum, the three states with the lowest levels of income inequality are solid red: Utah, Wyoming and Alaska. Nebraska comes in fifth and Nevada ninth.

And what about down at the city level?

The liberal-leaning Brookings Institution looked at inequality by city, and the results show that 9 of the top 10 are run by Democratic mayors — including San Francisco, Boston, D.C., New York, Chicago, Los Angeles and Baltimore.

In contrast, 7 of the 10 least unequal cities are run by Republican mayors, and 9 of 10 are in red states.

And what about Obama, has he helped to reduce income inequality, or has it increased under his watch?

Now take a look at the national level. As the chart above shows, income inequality as measured by the Census Bureau was flat over the course of the George W. Bush years. But under President Obama, it’s been on the rise.

Under Obama, the poor have gotten poorer and the rich richer. Incomes for the bottom 20% have fallen in each of the past four years and are now 8% below where they stood when Obama took office. Meanwhile, incomes of the wealthiest 5% have climbed under Obama, after adjusting for inflation.

IBD had a nice graph for that last point:

The Gini index measures income inequality
The Gini index measures income inequality

So, why is this happening? Why does taking money from “the rich” and giving it to “the poor” makes income inequality worse?

IBD explains:

As we’ve seen over the past seven years, higher taxes, vast new regulations and sharp increases in spending primarily benefit a relatively small number of well-connected people and those companies that can afford an army of lobbyists. In other words, the rich.

At the same time, higher taxes, more mandates and onerous new regulations stifle innovation and make it harder to start up new companies — the sort of companies that create new jobs and new opportunities. The Kauffman Index of business startups, for example, has been below average since 2011.

Incomes are down, because there aren’t enough job creators. We have a 38-year LOW in labor force participation. People rise when there are lots of job offers from job creators. The more people looking to hire, the more people can shop around and get the most salary and benefits for their labor. But wages have not gone up under Obama. He punished job creators with taxes and regulations, so they are creating fewer jobs. Fewer jobs means less competition. Less competition means lower wages and fewer worker benefits.

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