Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds

by Derek Thompson, senior editor at The Atlantic, where he oversees business coverage for the website.

 

Here’s a brief economic history of the last quarter-century in taxes and growth.

In 1990, President George H. W. Bush raised taxes, and GDP growth increased over the next five years. In 1993, President Bill Clinton raised the top marginal tax rate, and GDP growth increased over the next five years. In 2001 and 2003, President Bush cut taxes, and we faced a disappointing expansion followed by a Great Recession.

Does this story prove that raising taxes helps GDP? No. Does it prove that cutting taxes hurts GDP? No.

But it does suggest that there is a lot more to an economy than taxes, and that slashing taxes is not a guaranteed way to accelerate economic growth.

That was the conclusion from David Leonhardt’s new column today for The New York Times, and it was precisely the finding of a new study from the Congressional Research Service, “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.” 

Analysis of six decades of data found that top tax rates “have had little association with saving, investment, or productivity growth.” However, the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality. Past studies cited in the report have suggested that a broad-based tax rate reduction can have “a small to modest, positive effect on economic growth” or “no effect on economic growth.”

Well into the 1950s, the top marginal tax rate was above 90%. Today it’s 35%. But both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s. At the same time, the average tax rate paid by the top tenth of a percent fell from about 50% to 25% in the last 60 years, while their share of income increased from 4.2% in 1945 to 12.3% before the recession.

Here are two graphs of the top 0.1% and 0.01%. The first shows average tax rates since 1945 — down, down, down.  The second shows share of total income since 1945 — up, up, up.

In short, the study found that top tax rates don’t appear to determine the size of the economic pie but they can affect how the pie is sliced, especially for the richest households.

The paper is a good reminder to be humble about taxes as a tool for growing the economy. They remain, above all, a tool for collecting revenue and tweaking incentives for specific economic behavior. Congress has cut tax rates repeatedly over the last 60 years, while the country and the global economy have undergone considerable changes that probably had a greater effect on growth. For years after World War II, the U.S. was a singular economic powerhouse with an enormous manufacturing base that employed nearly 40% of the economy. For the last decade-plus, the economy has grown at a considerably slower pace and the gains have accrued to a smaller and more elite share of the economy.

Southwest Michigan Bridges Out of Poverty

Southwest Michigan Bridges Out of Poverty

Check out this new Facebook Page!

The Question of Support

When should one stop helping someone in poverty? Is it when the person misuses the help, becomes “rich and famous”, can repay, after helping ten times, after fifty?

Hidden rules, expected outcome, and relationship influence the underpinning of help. It depends on the exchange whether money, a tangible object (car, furniture), or something more subtle (trust, motivation).

Illustration:  I give five dollars to a friend so she can get gas to get home. At the station, she buys two dollars worth of gas; she takes three dollars and buys a bag of chips, lotto ticket, and soda. When I speak with her, she regales me with her adventure of coasting into her parking space on fumes. I say to myself, say I, Self, “Why buy junk food and a lotto ticket, put her self at risk; when she had money to make it home?” I am offended.

Why?  Because my hidden rules/values say that I exchanged my money for a specific purpose, whether, voiced or not. The understanding: my money for her gas, safety, and getting home. She did not value my rules, money or her safety. My expected outcome was her getting home safely, using gas that I purchased. Friendship led me to help her. I gave on my terms.  

The primary issue is choices. I chose to help by giving money. After those five dollars left my hand, it was no longer my five dollars. If she chose to buy five tickets, walk home, or ask someone else for help, is it my concern?

Other questions:  Am I enabling her, is she using me? Could I have aided differently? Was this purchase valid? Is this a recurring pattern? Was my motivation valid? What is her back-story and how did it influence my decision? Will I help again?

Life, when you are in poverty, is navigable but never easy. Help comes gift-wrapped in the pretty paper of SUPPORT, sometimes benign, sometimes toxic. The word “support” broadens the issue of “help”. It formulates a more personable platform. It can empower from both sides. The questions are now when and if to stop supporting, and under what circumstances?

The answer is whenever either party chooses to end the exchange. Respecting an individual’s right to choose is support in itself.

“Go and sin no more.” Jesus said when He healed. Did He ever say give me back My gift of healing? Was He less or more of a healer because of their choices? Did their choices change Him?

Let God use support as He wills. Expect a good out-come but do not dictate it.  All have the power of choice. All must use their brains and hearts to make the best decision when offering or declining support.

I am Karen or Kadie (KD). I come from a background of generational poverty, which was a surprise to me because I did not grow up in poverty. I grew up in Delaney Projects, Gary, Indiana.  I was 18 months old when we moved there, before living in the “projects” became an undesirable branding, and I left for the first time after high school, I was 18. It was not poverty; it was everyone simply living and surviving from day to day. –I graduated from the Bridges Out of Poverty, Cass County Getting Ahead Class of 2011, in Cassopolis, Michigan, where I relocated in 2004 from Battle Creek, Michigan. I am one of five associates in the pilot Leadership Development Initiative (LDI). LDI is an offshoot of the Cass County Getting Ahead assembly. Our group’s focus is the “Pygmalion” of hidden leadership skills in Getting Ahead graduates. We are encouraged to continue learning about our selves and our community beyond the Getting Ahead process. We are writing the manual for the future graduates/LDI candidates to follow. Our plan foresees individual and group projects with which to instruct, inform, and involve the community in the eradication of poverty, one person at a time. — My interests lie in art, expressed in various methods; communication through writing, singing, and conversation; reading (lots and lots of reading); cooking, and being generally a creative nuisance.

Snyder Vetoes After-School Funding

On June 26, 2012, Michigan Governor Snyder signed the budget bills into law.  The Governor vetoed several items in PA 200, including $1 million for before and after school programming and a $3 million increase for 0-3 prevention programs.

The $1 million for Before- or After-School Programs was included in the Conference Committee budget because of extraordinary efforts of members of the Michigan After School Partnership (MASP) and State Representative Greg MacMaster (R- Kewadin) who was a member of the Conference Committee. This situation reminds us that even when the House and Senate agree on something, it is within the power of the Governor to veto any budget item or legislation that crosses his desk. Michigan’s Children staff and the other members of MASP will continue to work through the summer, and into the next budget cycle, to ensure the Legislature and the Governor understand the impact out-of-school time programs have on closing the achievement gap.  Other funding that was vetoed would have increased funding for 0-3 prevention programming by $3 million. In a budget of $48 billion, the $4 million vetoed may have seemed like a small cut, but these programs, funded entirely through federal TANF dollars, are essential to decreasing the achievement gap for low income families and children of color.

Excerpted from a Michigan’s Children Newsletter

The Cost of Living Segreagated Lives

I’ve been thinking a lot lately about income segregation, how it operates and what it means.  Fundamentally, I think it is one of the most significant barriers to a thriving democracy and a health community.     Poverty concentrates.  So in South Bend, where one in four people live in poverty, it isn’t evenly spread across all zip codes.  Instead it gets concentrated so that we have contiguous blocks of people in poverty, some in deep poverty, some just above the threshold.   It means we may we live only miles apart, but the economic separation of our lives creates a kind of geography of difference that can be as extreme as living worlds apart.   “The rising inequality is beginning to produce a two-tiered society in America in which the more affluent citizens live lives fundamentally different from the middle- and lower-income groups,” writes noted Sociologist William Julius Wilson. “This divide decreases a sense of community.”    It’s brought back memories from fifteen years ago in Tucson when I was at the University of Arizona and I spent several years with a wonderful group of kids from 5th grade through high school. We called ourselves “ArtsBridge.”    We met for weekly tutoring sessions at my home, but I also went to birthday parties, quinceaneras, church services, and graduations.  I hung out in their neighborhoods, went to school functions, and took them on campus to see my classes.    Some of the time we focused on academics, but much of it was about building relationships and having fun.  The idea was that when a crisis showed up, we’d have the friendships as a foundation for problem-solving.   My academic training taught me about the statistics, theories and policy perspectives related to structural inequality.  But by being on the inside of those children’s lives, they taught me that there were barriers and problems I would never have to navigate.   I remember going to the gas station and filling my tank and having the kids remark how incredible it was: their parents could only put in a few dollars at a time and sometimes the car stayed parked until gas money could be found.    I remember going into one student’s home to help with homework and as twilight turned to dark, the mother went into a back bedroom to unscrew a light bulb and move it to the kitchen so we could continue.    Weekly, I was confronted with the differences of living in a world where I didn’t have to spend so much of my mental focus, physical energy and emotional stress on simply putting gas in my car or keeping the lights on.     Some of the kids made it beyond where their parents had stopped: into college and presumably onto better paying jobs.  Others didn’t.   What I saw then, I have 2012 statistics for now:  children who spend a year or more in poverty are 38% of the school population, but 70% of the school dropout population.  On average, a high school dropout makes just over $20,000. An Associate’s Degree almost doubles that.      And so the cycle goes, until the gap in income between having a college degree and not having a high school diploma can be as wide as 76%.  Which adds up to important differences in financial stability, which leads to more resources, options, social power, and sense of control.   How extreme is economic segregation?  Recently, we gave a Bridges presentation to a nearby school district and found they had a school system in their county with 9% free and reduced lunch, and another with 99%. Free and reduced lunch is the one reliable indicator of economic stress in a school district.  Those two figures – 9% and 99% – speak volumes about the different economic realities of two districts just miles apart.    I’m not a mathematician, but to me, the equation is simple.    Poverty is expensive. It causes suffering, drains resources and locks up human potential.  And we simply can not afford to ignore the extraordinary potential of so many people whose skills, talents and dreams are often unrealized because they are in survival mode, whether we are in Tucson, Arizona or South Bend, Indiana.     The more separated we are, the less we understand each other, the less we matter to each other.  We all bear the cost, just not equally.   Income segregation is in our own backyard and we can do something about, but it requires awareness, tools, and the intent to do something about it.  I believe Bridges can be a part of that response in powerful and creative ways.  We hope you’ll join us.   This article was written by Bonnie Bazata, Executive Director of St. Joseph County Bridges Out of Poverty and reprinted with her permission.   Want to join this great work? Be an ally at our Networking Meetings, every third Monday from 6 – 7:30 at the Action Center, 301 E. Main St., Dowagiac.

No Hungry Kids!

Michigan No Kid Hungry reaches out to families on summer meals As part of the DHS partnership to increase use of summer meal programs, Michigan No Kid Hungry is launching a pair of innovative methods for children and families to locate the nearest program sites. By texting FoodMI to 877-877 or by simply calling 2-1-1, they will find summer meals sites, regardless of where they live in the state. These options are in addition to the Department of Education’s site locator map. DHS also has developed and produced a summer food outreach flyer, which has been circulated to every public school district and the network of charter and private schools. Please assist this outreach effort by distributing this flyer to any of your networks. Thanks to all for your efforts to help ensure that all Michigan children have access to the food they need to keep them healthy and active this summer and prepared to start the next school year energized and ready to learn. For more information, visit NoKidHungry.org/Michigan.

Human Trafficking Seminar

• SOUTHWEST MICHIGAN

  HUMAN TRAFFICKING SEMINAR

   

  Sponsored by 

  Michigan Attorney General’s Office

  Cass County Human Services Coordinating Council

  Cass County Prosecutor’s Office

  Domestic and Sexual Abuse Services 

   

   

  Human Trafficking has become a significant concern in many parts of our country. 

  Michigan is no exception.  Come learn from regional experts about human trafficking and what you can do to address this issue.

   

   

  TIME AND LOCATION:

  • Wednesday, July 18, 2012, 9:30 – 4:00
  • Southwestern Michigan College, Dowagiac, MI

   

  PRESENTERS: 

  • Michigan Attorney General’s Office, Criminal & Child/Youth Services Division
  • Michigan Department of Human Services, Refugee Services
  • Hispanic Center of Western Michigan
  • Refugee Services
  • Women at Risk

   

  WHO SHOULD ATTEND:

  • Faith Community
  • Law Enforcement
  • Human Service Agencies/Employees
  • Community Collaborative Coordinators

   

  GOALS: 

  • Raise awareness about human trafficking
  • Establish local protocols
  • Strengthen prevention efforts

   

  COST:  $20 per attendee.  Lunch included. 

   

  REGISTRATION:           http://swmihumantrafficking.eventbrite.com

   

  Direct Inquires to Ruth Andrews, Cass County Human Services Coordinating Council 269-445-0269

Deb and DeWayne: Our Story

Debbie and I (DeWayne) have been together for 12 years, mainly living off my disability income. I was arrested in 2008 for manufactoring and distributing pot. The newspaper described the plants as 6 ft. high; they were barely 12 inches tall. Deb and I were arrested in June of 2010 for manufactoring and distribution of pot and possession of meth. It was a probation violation for me. Debbie had never been in jail before. She was sentenced to 70 days, $975 in fines with two years probation.. While we were both in jail we were evicted from the Maple Grove Trailer Park because of the drug manufactoring crime. When Debbie was released she had no where to go, no one to pick her up, no money, no phone and no identification. She suffers from depression and keeps to herself; she doesn’t ask for help. The jail nurse was aware of her situation and arranged for Navigator volunteers to assist her. She spent the weekend at Hope’s Door, and then moved to the Decatur Family Shelter. She stayed at the shelter for two months, until arrangements were made for her to get a subsidized apartment in Cassopolis.

I was sentenced to a year in jail and $375 in fines. Once Debbie was back in Cassopolis she visited me every week. When I was released I was able to move in with Deb, and after a few months we were able to find our own apartment in Cassopolis. I receive $690 a month for disability. Our rent is $475.00 which leaves $215 for food, court costs and utilities. I can’t get food stamps because I have 2 felonies. Our gas was shot off most of the winter until a friend helped. My son helped us to keep our electric on.

We bicycle around and pick up recyclable cans on the roadside – continually – just to eat, another day. A few days ago we saw bags of cans next to a trash can, looked like about $40 worth. We were told its against the law to take bags of recyclables off the street. It’s hard to resist them when you know you’re just trying to survive, but we don’t want to go back to jail. I feel like we’ve already served time and paid the price for breaking the law. Why do we feel like we are still being punished every day? Our son gives us cans and bottles so we can pay our court costs and keep from going back to jail. Every little bottle or can is much appreciated when you are trying to survive.

Leadership Development Academy

Cass County Bridges Out of Poverty, a community-wide poverty reduction initiative, is pleased to announce that it is the recipient of a Voices for Action grant which has enabled it to fund a Leadership Development Initiative.  Voices for Action is a statewide effort to reduce poverty 50% in Michigan by 2020. Led by the Michigan Department of Human Services, Voices for Action has created a network of organizations including human service organizations, government agencies, local faith-based and community organizations, non-profits, and businesses.

Cass County’s Leadership Development Initiative is empowering  individuals coming out of poverty to become leaders in the community.

The six month initiative began in January and will end in June. Participants include Diane Bailey, Karen Ford, Deborah Hackworth, Veronica Stewart and Rosita Tipton. Their work began by defining leadership, examining leadership strategies, assessing the strengths and weaknesses of their individual leadership styles, and building group consensus on next steps. Their challenge is to design the Leadership Initative to be self-sustaining, and to put their skills to use in service to Bridges Out of Poverty and the Cass community.

Poverty is a problem that affects both individuals and the community.  Bridges Out of Poverty maintains that by empowering individuals who have lived through poverty, we will create strong community leaders who are committed to eliminating poverty.

Tax Season

It’s tax season!

Do you know somebody that may need assistance with preparing their taxes?  EITC Coalition has announced their Volunteer Income Tax Assistance (VITA) schedule for 2012.

BERRIEN COUNTY

Benton Harbor, M-TEC at Lake Michigan College
400 Klock Road, Benton Harbor
**No appointment needed
Tuesdays, 4:30 pm – 8:00 pm; Saturdays, 9 am – 1 pm
January 31; January 28
February 7, 14, 21, 28; February 11, 25
March 6, 13, 20, 27; March 10, 24
April 3, 10; April 7

Niles, Niles District Library
620 East Main Street, Niles
**Walk-ins and appointments—call (269) 205-8829 for appointment
Mondays, 4:30 pm – 8:00 pm; Saturdays, 11 am – 4 pm
January 30; February 4, 18
February 6, 13, 20, 27; March 3, 17, 31
March 5, 12, 19, 26; April 14
April 2, 9

Berrien Springs, Andrews University—Chan Shun Hall
4185 E. Campus Circle Drive, Berrien Springs
**Must call for appointments—(269) 471-3339
Wednesdays, 4:00 pm – 8:30 pm; Thursdays, 4:00 pm – 8:30 pm
February 8; February 16
March 7; March 1
April 11; April 5

Berrien Springs, Berrien Springs Community Library
215 West Union Street, Berrien Springs
**Must make appointments at library front desk
Thursdays, 4:00 pm – 8:30 pm
March 22, 29

CASS COUNTY

Cassopolis, Cass District Library
319 North M-62, Cassopolis
**Walk-ins and appointments—(269) 445-3400 ext. 21
Thursdays, 4:30 pm – 8:00 pm Saturdays, 10 am – 2 pm
February 9, 23; February 18
March 8, 22; March 3, 17, 31
April 5; April 14

Provided by a Partnership Between United Way of Southwest Michigan and Southwest Michigan Community Action Agency

Important Information

Please bring the following items with you when you visit one of the tax preparation sites:

Valid picture ID, such as Drivers License or Michigan State ID. 
A copy of last year’s tax return (2010), if you have one. 
Social Security cards for any person listed on the return. Social Security cards are necessary to ensure the information is copied correctly onto the tax return. 
W-2 and/or 1099 forms from all 2011 jobs. 
1099-G form, if you or anyone in your household received unemployment insurance benefits at any time in 2011. 
1099-INT form, if you received bank interest income in 2011. 
Any statements received from a mortgage company during 2011, or name and address of landlord and amount of rent paid. 
Property tax receipts or bills for taxes paid in 2011. 
IRS notices or letters sent to you or someone in your household during 2011. 
Heating bills from 11/01/10—10/31/11or contact your utility provider for your 2011 allowable heat credit deduction.
If you have an individual Taxpayer Identification Number (ITINs), please bring your ITIN card that was sent to you from the IRS. You will need either the ITIN or a Social Security Number in order to claim the Child Tax Credit.
Routing number and account number from your bank for your refund to be directly and quickly deposited into your account. If you don’t have a bank account open at the present time, we will have representatives of a local bank at some of the sites that will assist you to open an account for this purpose.
If you have received assistance from Department of Human Services in 2011, bring your annual Depart-ment of Human Services statement. 
Receipts for child care expenses, including provider’s name, address, and EIN/Social Security Number.
Closing statement for first-time home buyer credit. 
Invoices and/or receipts for residential energy credit.

Eligibility Information

Earned income and adjusted gross income (AGI) must be less than: 

$43,352 ($48,362 married filing jointly) with three or more qualifying children 
$40,363 ($45,373 married filing jointly) with two qualifying children 
$35,535 ($40,545 married filing jointly) with one qualifying child 
$13,460 ($18,470 married filing jointly) with no qualifying children 

For more information, visit www.irs.gov

*******

It is also important to note that during tax season, there is a considerable amount of predatory lenders looking to “help” people in poverty.  Things like Refund Anticipation Loans promise cash now, but often do not disclose in easily understood terms the consequences of those loans.  High interest rates and high fees may cause harm to individuals, and often the money arrives just days before the tax refund itself.

Another thing individuals should be aware of is having someone prepare your taxes can be more expensive than it’s worth in the end.  Extra filing fees, fees to have refunds loaded onto debit cards, and other mysterious costs can prevent you from getting your full refund.  VITA provides free assistance to prevent low-income individuals from having to pay these costs.

As a general rule, also beware of scams through email promising you a fast refund.  These are typically individuals looking for personal information, such as Social Security numbers, and to make you a victim of identity theft.  The IRS will never send you unsolicited emails, and you should never give out private information through unsecured websites or emails.

Thank you to SJC Bridges for providing us with information regarding tax-season scams – for more information contact sjcbridges@gmail.com.

*****

For more information about what you qualify for, check out http://www.milhs.org/wp-content/uploads/2010/07/MoneyBackinMIforTaxYear2011.pdf.  This article provides a great deal of information about different tax credits and eligibility requirements.  OR just receive VITA on one of the dates/locations listed above!