All Taxes Hurt the Poor-Shoots from the Grassroot Institute of Hawaii – Jan. 24, 2005

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A single quote from the editorial in the ”’Honolulu Star-Bulletin”’ on Sunday, Jan. 3, 2005 starkly illuminates a certain faulty point of view. Quoting Bob Zahradnik, senior policy analyst at the Washington-based Center on Budget and Policy Priorities referring to the current income tax, the line was, “This income tax burden has the effect of making poor working families poorer . . . “

“What’s wrong with that statement?” — one might ask, and you would be right to do so. What is wrong with that statement is that it is biased, too narrow in its scope. The income tax burden in this nation, and in Hawaii in particular, makes not only working families poorer, it makes everyone poorer: poor, lower middle class, middle class, upper middle class, and wealthy alike. It hurts everyone alike, not just the poor.


It is typical of a publication like the Star-Bulletin to only focus on the poor, because those who work there apparently don’t understand the reality of economics in the midst of their socialist dominated world view. They don’t seem to understand that if the income tax burden makes an upper middle class employer “poorer” then that employer is going to be less likely to hire or give a raise to the “poor, working class” person. Thus the tax burden that burdens one, burdens all.

This is especially true when one considers that the tax burden in this state is, if not the highest, among the highest in this nation. The typical view is to only focus upon the least among us, as if they were an isolated group. They are not. They are helped, employed and given the opportunities for better jobs by those more “fortunate.” And if you think about it, it cannot be any other way.

It also stands to reason that if the government, through taxation, damages the standing of the “more fortunate” they, in turn, are going to be less able to hire more “less fortunate” workers for their businesses. So the taxes that are designed to punish the “rich” end up punishing the poor. This is the point, so well understood and articulated in sound economics, that those at publications like the Star-Bulletin simply don’t understand.

The “rich” are never truly hurt by tax increases, the poor are. Every effort to circumvent this law of economics is doomed to failure. You can try all the wealth redistribution schemes you want, as in the above referenced Star-Bulletin article where the same policy analyst advocates “earned income tax credits” (a fancy name for a form of welfare) but in the end all that will happen is that fewer poor people will end up being employed or given raises.

What the people that advocate such schemes fail to see, cannot see, refuse to see, is that it isn’t the failure of the wealthy to pay their fair share that is the problem here, it is the laws of economics. The more the government confiscates from the wealthy in order to redistribute to the poor, the more government restricts the wealthy from helping the poor by creating more jobs and income opportunities. Raising taxes stifles economic activity.

This point is tacitly admitted anytime any government entity offers tax break incentives in order to spur economic growth. Why offer such incentives unless one already knows that taxation hinders economic activity and growth? Isn’t the obvious answer then to lower taxes for everyone and everybody will be better off? If this isn’t the case, then why offer any tax breaks at all?

The answer is because lowering taxes attracts businesses and spurs economic activity. Conversely, raising taxes damages economic activity. It cannot be otherwise. Thus raising taxes, in any form must be seen as the economic damper that it is, regardless of the reason or justification. But it is especially true of wealth distribution schemes that attempt to succor the poor.

In the end the poor will still be poor and the economic activity that would have provided them jobs to lift them out of that poverty is smothered. In the last 40 years or so of this nation’s experiments with the welfare state one would have thought we’d learned this lesson by now. For how long, how many times to we have to keep trying the same failed policies advocated by the policy analyst in the ”’Honolulu Star-Bulletin”’ article before we learn that they don’t work. For some, it will probably take forever.

”’Don Newman, senior policy analyst for the Grassroot Institute of Hawaii, Hawaii’s first and only free market public policy institute focused on individual freedom and liberty, can be reached at:”’

”’This editorial is intended to provoke thought, discussion and an examination of issues. It does not reflect official policy of the Grassroot Institute of Hawaii. See the GRIH Web site at:”’

”’ reports the real news, and prints all editorials submitted, even if they do not represent the viewpoint of the editors, as long as they are written clearly. Send editorials to”’



Daily Policy Digest


Monday, Jan. 24, 2005

Opening markets in developed countries to trade from less developed ones is a more effective strategy to reduce poverty than foreign aid, say John Micklethwait and Adrian Wooldridge of the Los Angeles Times.

Foreign aid generally does little to alleviate structural poverty; instead, it usually falls into the hands of dictators. This explains, in part, why sub-Saharan real per capita income fell over the last three decades despite the world spending some $100 billion on aid.

Trade, by contrast, has a more reliable track record at improving living standards:

Trade has enabled poor countries, particularly China and India, to move millions of people out of poverty; in 2004, economies of developing nations grew by 6.1 percent, with China leading the way at 8.8 percent.

Through open markets flows access to better technology and goods; for example, over the last 15 years, vaccines have helped reduce the number of polio victims from 350,000 to 800 individuals.

The World Bank estimates that even modest liberalization of trade in farm goods and textiles between the West and developing nations could lift some 144 million people out of poverty by 2015.

Source: John Micklethwait and Adrian Wooldridge, “The Silent Disaster of World Poverty,” ”’Los Angeles Times”’, January 10, 2005.

For text:,0,744284.story

”For more on Benefits of Trade:”

”’Sprout of the Day”

We must remove government’s smothering hand from where it does harm; we must seek to revitalize the proper functions of government. But we do these things to set loose again the energy and the ingenuity of the American people. We do these things to reinvigorate those social and economic institutions which serve as a buffer and a bridge between the individual and the state — and which remain the real source of our progress as a people.

– Ronald Reagan 1981

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