Less Government, Less Poverty
New Mexico is a poor state. Most of us already know this, but what is less clear is what, if anything, can be done about it.
There are plenty of well-funded advocates for the poor – New Mexico Voices for Children is the probably the most well known – but their prescription for poverty relief often boils down to simply raising taxes to pay for more government poverty programs.
Needless to say, this policy prescription leaves many productive, tax-paying citizens with a bad taste in their mouths.
After all, nearly 30 percent of the money the average New Mexican earns is already taxed away by the federal, state or local governments.
Surely, if government programs that spent billions of dollars were the answer, we’d have the problem licked by now.
A new paper by the authors of this this column takes a close look at poverty trends here in New Mexico and nationwide and finds that lowering taxes and reducing spending, not bigger government, is the answer to poverty eradication.
For starters, Ladner and I found that the majority of the decline in poverty occurred before the advent of War on Poverty programs of the mid-1960s. In 1948, the national poverty rate was 30 percent. By 1966, the poverty rate had fallen to 15 percent. Since then, poverty rates have hovered in double-digits with the current rate residing at 12.6 percent. Clearly, the “Great Society” programs introduced in the 1960s have not done as much to lower poverty rates as the post-World War II economic boom did.
To analyze how poverty trends among the states, Ladner and I studied poverty data from the 1990s and compared the results of the top 10 and bottom 10 states in both spending per capita and in overall tax burdens.
The results will undoubtedly come as a surprise to those who think that government has the answers to reducing poverty.
Over the decade, the low-tax states saw poverty rates fall by more than 9 percent while poverty rates actually increased by approximately 2 percent in the high-tax states.
In the high-tax states, poverty rates declined by a modest 2.8 percent, while in the low-tax states, poverty rates dropped by a robust 10.3 percent.
In a similar vein, childhood poverty in low-tax states dropped by 9.26 percent, while childhood poverty in high-tax states rose by 3.4 percent.
The story was the same when we took a look at the impact of spending on poverty reduction. It is worth noting that New Mexico was one of the top ten states in spending per capita, yet it ranks just behind Louisiana and Mississippi with one of the highest poverty levels nationwide.
During the 1990s, overall poverty rates declined by a robust 8.42 percent in the lowest spending states while the big-spenders not only failed to reduce poverty rates, but they actually suffered an increase in poverty rates of 7.6 percent.
Notably, Colorado led the nation in reducing childhood poverty during the 1990s and had the fourth best record of reducing overall poverty during the decade, as well. With Colorado’s Taxpayers’ Bill of Rights having been enacted in 1992 and implemented in 1993, there can be no doubt that the law’s tax and spending reductions had a salutary impact on poverty.
New Mexico Gov. Bill Richardson has proposed an 11 percent budget increase for the next year alone. Not coincidentally, Republicans in the Legislature have proposed a constitutional amendment similar in many ways to that of Colorado.
As the data make clear, limiting spending and taxation are more effective means of reducing poverty than is bigger government.
For too long, New Mexico has relied on government spending – whether that meant federal largesse or state and local governments – but with poor results. It is time for New Mexico’s political leaders to limit government and stop tolerating high levels of poverty.
Gessing is the president of the Rio Grande Foundation, a nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility. Ladner is vice president for research at the Goldwater Institute, based in Arizona.