National Study Finds Reducing Taxes and Spending to be More Effective than Government Programs at Alleviating Poverty

(Albuquerque, New Mexico) – A new study released today by the Rio Grande Foundation called “Hood or Robin Hood? State Governments and the Reduction of Poverty,” takes a close look at the states’ records on poverty reduction during the 1990s.

What authors Matthew Ladner of the Arizona-based Goldwater Institute and Paul Gessing of the Rio Grande Foundation find may come as a surprise to self-professed advocates for the poor: government programs are less effective than are spending and tax reductions.

As Rio Grande Foundation President Paul Gessing pointed out, “The debate over how best to address poverty in New Mexico is a very important one to have. After all, New Mexico’s poverty rate is the third-highest in the nation (only Louisiana and Mississippi are higher).”

“New Mexico Voices for Children is one prominent group that claims to work on behalf of New Mexico children and families, so when Governor Richardson and the Legislature began reducing the top income tax rate in 2003, Gerry Bradley of Voices for Children called it a ‘Reverse Robin Hood tax cut,’” Gessing explained.

The new study’s findings directly contradict Bradley’s analysis. In fact, according to study co-author Dr. Matthew Ladner, “The 10 states that spent the least per capita during the 1990s reduced poverty by 8.42 percent while the 10 states that spent the most per capita actually saw their poverty rates rise by 7.6 percent. The trend was the same for childhood poverty as poverty in the 10 lowest-spending states fell by 9.26 percent while it rose by 3.4 percent in the big-spending states.

Notably, New Mexico was one of the top-ten states in spending per-capita.

“The data were similar when poverty data on the 10 highest and lowest tax states was analyzed,” noted Dr. Ladner. “Poverty decreased by 9.3 percent in the 10 lowest-tax states while it rose by nearly 2 percent in the 10 highest-tax states. The pattern again held true with child poverty which was reduced by 10.3 percent in the low-tax states and by only 2.82 percent in the high-tax states.”

Gessing summarized the findings saying, “Before Governor Richardson and the Legislature throw money at new and expanded anti-poverty programs, they should find hard data that show them to be more effective than the alternative – reducing taxes and restricting spending.”

The study can be found online at http://www.riograndefoundation.org/