Unbalanced Taxing Policies: Helping the Poor or “Shaping the Electorate”?

Christopher

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Aug 7, 2009
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This is a follow up to a thread recently about the 10 poorest cities in the nation and the fact they had all been controlled by Democrats for decades. Here is credible evidence showing a big reason why they are the poorest cities.

Two years ago I was reading about the problems with Michigan’s economy (Detroit in particular) and I came across some research from Harvard that demonstrated how two Democratic mayors ran on the platform of “helping the poor” and all they really did was increase their electoral base to give them advantage in re-elections. The result of increasing their base of support is obvious: the number of poor increased. Which was not a good thing for Detroit, but good for the Democratic mayors apparently.

Research was completed by two Harvard economics professors in 2003 about what they call “The Curley Effect”, named after a 4-time mayor of Boston. I am by no means an economics expert; however, their analysis made a lot of sense with regards to reasons why Detroit and other cities that have been controlled by Democrats for decades are facing such economic troubles. Link to research paper: http://www.economics.harvard.edu/faculty/shleifer/files/curley_effect.pdf

Here is a summary of the research paper, quoted from the abstract (bold, italic underline added):
James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections. We present a model of using redistributive politics to shape the electorate, and show that this model yields a number of predictions opposite from the more standard frameworks of political competition of Tiebout (1956) and Olson (1993), yet consistent with empirical evidence.

The basic findings are that over-taxing a certain group/population that is considered the base of one’s opponent is one way in which some politicians remove that group from the competition and Detroit, like Boston, has experienced the negative effect resulting from this. Another quote from the introduction of the paper:

We call this strategy — increasing the relative size of one’s political base through distortionary, wealth-reducing policies — the Curley effect. But it is hardly unique to Curley. Other American mayors, but also politicians around the world, pursued policies that encouraged emigration of their political enemies, raising poverty but gaining political advantage. In his 24 years as mayor, Detroit’s Coleman Young drove white residents and businesses out of the city. “Under Young, Detroit has become not merely an American city that happens to have a black majority, but a black metropolis, the first major Third World city in the United States. The trappings are all there – showcase projects, blackfisted symbols, an external enemy, and the cult of personality” (Chafets 1990, p. 177). Zimbabwe’s President Robert Mugabe abused the white farmers after his country’s independence, openly encouraging their emigration even at a huge cost to the economy.

This part of the paper is very telling about Young’s legacy of over 20 years as mayor of Detroit (bold emphasis added):

Young’s racial favoritism can be seen in his tax policy and his distribution of city services. A 1982 referendum tripled the commuter tax from .5 percent to 1.5 percent, and raised the residents’ income tax rate from 2 to 3 percent. This tax, which had no impact on Young’s poorer black supporters, strengthened the incentive for the better off to leave Detroit. City governments rarely pass income taxes, presumably because of the adverse migration effects. Young eagerly sought to tax his richer constituents to fund redistribution, arguably to drive them out.

Young initiated large building projects that put his supporters on the payroll. He lobbied for federally supported public housing—an absurdity in a city with huge amounts of housing selling for less than new construction costs (Glaeser and Gyourko, 2002) — to keep his supporters, as opposed to whites, as city residents. At the same time, Young cut back on the basic services that white Detroiters valued, such as police and fire. In 1976, he cut the police force by 20 percent, which along with his other attacks on the police department, perpetrated lawlessness in Detroit. Trash collection declined by 50 percent during Young’s early years.

…

Did Young hurt Detroit? Did he hurt the black residents of Detroit? There is no question that Detroit was in much worse shape when Young left office than when he first entered it. Its population fell from 1.51 million in 1970 to 1.03 million in 1990, a 32 percent decline. The unemployment rate as a percentage of civilian labor force rose from 10.3% in 1969 to 20.6% in 1990. The percentage of households living below the poverty line rose from 18.6% to 29.8%. Nearly all the victims of this unemployment and poverty were Young’s black supporters. Over Young’s twenty years, surely in part due to his policies, Detroit became an overwhelmingly black city mired in poverty and social problems. While some of black Detroit was worse off before Young, it is hard to believe that a less confrontational mayor would not have helped his constituency more.
 
Continued...

The conclusion (bold emphasis and italics added):
Our theoretical models, as well as empirical examples, all share a central conceptual theme. Specifically, it is generally thought in economics, following the fundamental research of Tiebout (1956) and Brennan and Buchanan (1980), that elastic response by the voters to tax and other policies disciplines the government. Good policies bring in resources and voters; bad ones keep them out. With the Curley effect, this result is reversed. When politicians seeking to stay in power use distortionary policies to force out their political opponents, the more elastic response renders bad policies more rather than less attractive. The Curley effect, and more generally the economics of shaping the electorate, might thus shed light on a broad range of government policies that appear too bad to be true from alternative perspectives.

An important point this research indicates is that there are problems that occur when the government becomes involved with wealth distribution particularly when the taxing policies become unbalanced. It really does not matter whether the intention is to remove one’s opponents or there is real intent to help the poor or any other seemingly noble objective, the result is the same when taxes are overly-focused on one group. It ends up defeating the purpose for the policies and only perpetuates the poor’s circumstances. What confuses me is that these same politicians who implemented these policies have favorable views as having “helped the poor” when in reality it could not be further from the truth. It does not seem that Young or Curley really cared about the poor. They only really seemed to care about power and perpetuating their power.

How can we believe politicians who claim they really want to help the poor when their policies are similar to Young’s or Curley’s? Do the mayor’s of these 10 poorest cities really care about the poor? How can they if they have not really helped the poor out of poverty. Young doubled the number of unemployed and increased the number below the poverty line by 50% during his terms.

Obama and many Democrats in Congress seem much the same in their policies as Young and Curley. The clear change that needs to come to these cities and America in general is for the Democrats to stop “shaping the electorate.”
 
Another quote from the article, which gives a better summary for those not wanting to read it all:
In this article we have shown how differential taxes on groups of voters, such as ethnicities, races, or classes, can shape the electorate. We argued that some political leaders use such taxes to increase the likelihood of reelection by encouraging the emigration of voters opposing them. Moreover, these taxes can be attractive to a political leader, even if the consequence is the impoverishment of both the overall community and their own supporters. We call such policies the Curley effect, and claim that they describe the tactics of numerous politicians, including American mayors James Curley and Coleman Young, and Zimbabwe’s President Robert Mugabe.
 
Just read Lord Woodehouse, a guy that lived 250 years ago. He said that once the public learns it can draw from the public largess, they basically will take over. They will control who's in power by the vote.They will of course vote for those that give them everything.

The dude was smart and very insightfull. The average life of a republic is about 250 years. I think we are approaching that mark now.
 
There is no such thing as a tax that doesn't effect different classes differently.

I do not doubt that in some cases taxes are designed to benefit the poor and disadvantage the better off.

Likewise I do not doubt that in some cases taxes are designed to do exactly the opposite.

How could it possibly be otherwise?

Even a flat tax has wildly unequal outcomes depending on class and income.
 
There is no such thing as a tax that doesn't effect different classes differently.

I do not doubt that in some cases taxes are designed to benefit the poor and disadvantage the better off.

Likewise I do not doubt that in some cases taxes are designed to do exactly the opposite.

How could it possibly be otherwise?

Even a flat tax has wildly unequal outcomes depending on class and income.

The problem is that with the Curley effect, the taxes implemented are BEING SOLD to us as a way to help the poor when they in fact tend to do just the opposite and increase the poor; which gives the politicians who "sold" the tax an even greater chance of re-election.

When are we going to realize that these types of tax policies have continually failed to deliver on their "promises"?
 
The Local Democrats were not alone in raiding the public cookie jar to feed themselves and their friends... they had eager help from the Local Republicans, the National Democrats and the National Republicans.
 
The Local Democrats were not alone in raiding the public cookie jar to feed themselves and their friends... they had eager help from the Local Republicans, the National Democrats and the National Republicans.

I agree with you about raiding the cookie jar, both sides are guilty. My point is regarding the "tax the rich to help the poor" policies that are typically from Democrats, which seem to do just the opposite of helping the poor.
 
Policies designed to "help the poor" usually end up hurting them in the long run anyway.
Rent control in NYC is a good example. It controlled rents, which was great for people who already had apartments (and voted). For young people wanting to move to NYC or immigrants it reduced the stock of available housing, making it that much more expensive. Inhabitants of rent controlled apartments today are mostly middle class people, sometimes willing their apartments to posterity.
It is a con.
 
He certainly isn't dumb, neither is his wife. He's a real Liberal sort of wingnut, like your side has extreme religious wingnuts.

I like his idea about social security. Allow people who want to retire early to do so for 6 months, expand medicare and pay them as if they are on ss with tarp money until they reach retirement age. Better than giving tarp to the banks.

It will open up their job, it's job creation. Not quite that simple but worth thinking through.
 
rent control is a targetted advantage, the legacy leases in santa monica, CA, which i am familiar with, are still controlled by tenants from the 70s and 80s often times.

this was a good post i hadnt yet noticed. both the study and certainly the OP have made some leaps in observing the facts of the matter.

tax is public finance. they could sell it as a blowjob, but in analysis, it is prudent to see it for what it is.

detroit didnt suffer marginalization exclusively from the mayor. the city leaned heavily on automakers and heavy industry, which has since shrunken and broadened from how it was in the 50s and lingering into the 70s. michigan altogether has resolved for 20-30 years to go down with the ship that heavy industry built.

what i think is accurate about the article is the political tool that is public finance. on this local scale where people could move 15 miles in any direction and escape a city's jurisdiction, it presents a valid case for how tax policy could drive out opposition support. particularly with a loony city income tax. this, however, does not translate directly to a national scale. individuals wont leave the country to avoid taxes quite like they would leave detroit metro.

voting demography doesnt work so plainly nationwide. democrat districts sport higher average incomes than republican districts, quite consistently. this echos out to the state level as it might down to the individual voters. that said, tax burden alone wont swing a national election vote as much as race, sex or urban/rural residence.
 
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The Local Democrats were not alone in raiding the public cookie jar to feed themselves and their friends... they had eager help from the Local Republicans, the National Democrats and the National Republicans.

I agree with you about raiding the cookie jar, both sides are guilty. My point is regarding the "tax the rich to help the poor" policies that are typically from Democrats, which seem to do just the opposite of helping the poor.

And taxing the FUTURE to help the SUPERrich wasn't exactly genius at work, either, now, was it?

Where's the enormous increase in revenues that we were promised as a result of tax breaks to the superich and corporations?

Oh, yeah, that's right...all that extra dough our superrich got, they pissed away gambling on naked derivatives, didn't they?

Just admit it.

Everything the Randian nitwits believed was either a MISTAKE (if you're charitable to them) or a LIE (if you believe they couldn't possibly be that stupid!)
 
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And taxing the FUTURE to help the SUPERrich wasn't exactly genius at work, either, now, was it?

Where's the enormous increase in revenues that we were promised as a result of tax breaks to the superich and corporations?

Oh, yeah, that's right...all that extra dough our superrich got, they pissed away gambling on naked derivatives, didn't they?

Just admit it.

Everything the Randian nitwits believed was either a MISTAKE (if you're charitable to them) or a LIE (if you believe they couldn't possibly be that stupid!)


It's responses like this one which explain why we need to completely do away with the "Progressive" tax system. When 1% of taxpayers are paying 40% of taxes... and you people carry on like you're somehow being robbed that the government isn't taking even more... there's an UGLY entitlement mentality in evidence.
 
And taxing the FUTURE to help the SUPERrich wasn't exactly genius at work, either, now, was it?

Where's the enormous increase in revenues that we were promised as a result of tax breaks to the superich and corporations?

Oh, yeah, that's right...all that extra dough our superrich got, they pissed away gambling on naked derivatives, didn't they?

Just admit it.

Everything the Randian nitwits believed was either a MISTAKE (if you're charitable to them) or a LIE (if you believe they couldn't possibly be that stupid!)


It's responses like this one which explain why we need to completely do away with the "Progressive" tax system. When 1% of taxpayers are paying 40% of taxes... and you people carry on like you're somehow being robbed that the government isn't taking even more... there's an UGLY entitlement mentality in evidence.

Democrats love class warfare. It is the only way they can win. They tell people they are poor because other people are rich. When companies make profits it is not because they are well run and offer good, well priced products. It is because they are ripping people off. If we could destroy this very mindset we would do more for this country than a dozen elections.
 
And taxing the FUTURE to help the SUPERrich wasn't exactly genius at work, either, now, was it?

Where's the enormous increase in revenues that we were promised as a result of tax breaks to the superich and corporations?

Oh, yeah, that's right...all that extra dough our superrich got, they pissed away gambling on naked derivatives, didn't they?

Just admit it.

Everything the Randian nitwits believed was either a MISTAKE (if you're charitable to them) or a LIE (if you believe they couldn't possibly be that stupid!)


It's responses like this one which explain why we need to completely do away with the "Progressive" tax system. When 1% of taxpayers are paying 40% of taxes... and you people carry on like you're somehow being robbed that the government isn't taking even more... there's an UGLY entitlement mentality in evidence.

1 % are paying 40% of the taxes meanwhile they're really making 80% of the profits.

That's a damned fine reason to rethink the whole damned system.

A flat tax makes perfect sense in a flat income world.

Anyplace else its been tried it is a drag on economic activity.
 
1 % are paying 40% of the taxes meanwhile they're really making 80% of the profits.

That's a damned fine reason to rethink the whole damned system.

A flat tax makes perfect sense in a flat income world.

Anyplace else its been tried it is a drag on economic activity.

Nope. From a Tax Foundation report, published last July:
"In 2007, the top 1 percent of tax returns paid 40.4 percent of all federal individual income taxes and earned 22.8 percent of adjusted gross income."
The Tax Foundation - Summary of Latest Federal Individual Income Tax Data

I'm not sure how I feel about the Flat Tax. It's had some initial success in Eastern Europe, but they aren't cutting spending enough to get the most out of it. I think it's pretty clear though, that when we have the bottom 50% of our citizens "voting themselves largess from our treasury"... we need to help them get some skin in the game. :eusa_whistle:
That's something that a Flat Tax could handily accomplish.

The "progressive" tax system we have now has led to corruption, abuse, and economic uncertainty. It's an arbitrary designation of "fair"... and it needs to be scrapped. The so-called "Fair Tax" doesn't solve these problems.

Perhaps the best thing to do would be to abolish the 16th and go back to a system whereby the federal government is no longer able to suckle from our individual incomes.
 
Democrats love class warfare. It is the only way they can win. They tell people they are poor because other people are rich. When companies make profits it is not because they are well run and offer good, well priced products. It is because they are ripping people off. If we could destroy this very mindset we would do more for this country than a dozen elections.

Well, exactly. It's a political winner. But in the long run, it destroys productivity. Robin Hood Economics drives producers away.

The difference between the Socialist and the Capitalist is that Socialists believe there's only so much pie to go around and that everyone should get a tiny slice. Capitalists know... that we can always make more pie. ;)
 
Democrats love class warfare. It is the only way they can win. They tell people they are poor because other people are rich. When companies make profits it is not because they are well run and offer good, well priced products. It is because they are ripping people off. If we could destroy this very mindset we would do more for this country than a dozen elections.

Well, exactly. It's a political winner. But in the long run, it destroys productivity. Robin Hood Economics drives producers away.

The difference between the Socialist and the Capitalist is that Socialists believe there's only so much pie to go around and that everyone should get a tiny slice. Capitalists know... that we can always make more pie. ;)

The problem with socialism is that eventually you run out of other people's money.-Lady Thatcher
 

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