A Declining Poverty Rate Versus a Declining Tax Burden

With all indicators showing the Rhode Island economy tanking at the state level, as well as national and international-level factors like the banking crisis and energy prices squeezing Rhode Island families, it comes as something of a surprise to learn that the Federal Government says that the overall poverty situation in Rhode Island improved during the years 2006 and 2007.

According to the Annual Social and Economic Statistical Supplement put out by the U.S. Census Bureau and the Bureau of Labor Statistics, the poverty rate in Rhode Island in 2007 was 9.5%, its lowest absolute level since 1990. The figure of 9.5% was 76% of the national poverty rate, the lowest relative poverty rate seen in RI since 1994, and the period 2006-2007 was the first time that Rhode Island’s relative poverty rate remained below 90% for two consecutive years since 1995-1996 — probably not coincidentally, around the same time that RI’s social services programs were redesigned in response to the Clinton administration’s welfare reform initiative.

The new data lets us add two more points to the graph first presented by Anchor Rising last year of relative poverty rate versus Tax Foundation state tax-burden ranking. This graph also incorporates the changes that the Tax Foundation has made to its ranking methodology since last year (which seems to have reduced some of the year-to-year swings in the RI rankings). Here is the scatterplot of current year’s relative poverty rate versus previous year’s tax burden using the new numbers; the points in blue represent the two most recent years…

PvRtVsTxBr1.JPG


Fans of the Tax Foundation rankings may be interested to know that Rhode Island has fallen out of the top 5 in terms of the taxes paid by its residents. RI “dropped” to 9th place in 2007 and, according to the Tax Foundation’s preliminary estimate, to 10th in 2008. It’s too early to add a 2007 tax rank versus 2008 poverty rate point to the graph, as 2008 poverty data won’t be released by the government until August 2009, but for a possible look ahead, the tax rank of current and previous years can be averaged together and compared to the current year’s poverty rate — for this data set at least, the averaging method produces a tighter fit to the data than by using the previous year’s rank alone…

PvRtVsTxBr2.JPG


Obviously, there is more than one cause in play creating a result like this, but it is pretty clear from the most recent 25 years of Rhode Island history that creating of a high-tax state is not a great method for attacking the problem of poverty.
































Year RI
Tax Rank
RI Relative
Poverty Rate
1980 15 82.3%
1981 12 83.6%
1982 8 88.7%
1983 10 95.4%
1984 12 88.9%
1985 15 66.2%
1986 19 65.0%
1987 16 60.4%
1988 17 75.4%
1989 20 52.3%
1990 16 55.6%
1991 17 73.2%
1992 11 83.8%
1993 12 74.2%
1994 12 71.0%
1995 10 76.8%
1996 9 80.3%
1997 8 95.5%
1998 9 91.3%
1999 10 84.0%
2000 10 90.3%
2001 6 82.1%
2002 7 90.9%
2003 5 92.0%
2004 4 90.6%
2005 4 96.0%
2006 5 85.4%
2007 9 76.0%

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Monique
Editor
12 years ago

With regard to Rhode Island’s tax ranking, Andrew, didn’t you determine from the Tax Foundation that our going from fifth to ninth highest taxed was an adjustment in how they calculate our ranking, not an actual change in the amount of taxes we all pay? (Something about segregating and omitting from our ranking taxes paid by out-of-staters.) So for all we know, perhaps if they re-calculated the four prior years, we’d be at ninth for those years, instead of fifth/fourth/fourth/fifth; i.e., unchanged for the last five years.
(This is not to challenge your theory but to actually get off topic and focus on the calculation of our tax ranking.)

Monique
Editor
12 years ago

Oh, great. Thanks, Andrew.

George
George
12 years ago

According to Joe Biden, paying higher taxes makes us “more patriotic”…
So, by Biden’s standard, we are among the most patriotic… and the new measurement criterium makes us a bit less patriotic.

Michelle Lee
Michelle Lee
12 years ago

Look! If the “CPS” was shut down like it should be there would be no issues with money… simple enough for everyone?
I have an open case. I have a job 5pm-1am. CPS rules that mothers are “not fit” to care for children if they work. I can have visits with my children only if I do not work! Even though they have the court and case plan saying I must!

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