Another Red vs. Blue Post: Does Blueness Cause High Income?
Earlier I showed that, on balance, the Blue states (Gore) subsidize the Red states (Bush). For every dollar that a Red state pays in taxes, they get back an average of $1.12; on the other had, for every dollar a Blue state pays in taxes, they get back an average of only $.87. That’s a -13% rate of return! And Bush said that the 2% rate of return on Social Security is bad! (See the postscript). Observing this disparity, I said this in passing:
“Factually, this [subsidy of Red states by Blue ones] doesn’t bother me. The Blue states are generally wealthier than the Red states, and this is a natural consequence of progressive taxes.”
But this leads naturally to an interesting question: Does liberalism cause higher income? Or does high income cause people to be more liberal? Or is there some third variable–education is a natural candidate–that causes both higher income and more liberal attitudes?
First, the facts: raw income-by-state data are available here, and population data are here. You can see them conveniently combined into one table here. Here are the highlights:
||Average Median Household Income
Clearly, while the population of the Blue states roughly equals that of the Red states, the Blue states earn nearly $900 billion (7% of GDP) more than the Red states. This means that because the tax system, even after factoring in all possible deductions and shelters, is moderately progressive, the Blue/Democratic states pay no less than 7% more of the nation’s tax bill than do Red/Republican states.
What’s the point of all this? In a future post, I’ll make some grand generalizations about progressive societies, the Dark Ages, and the connections between liberalism and wealth creation. I may even make the case that liberalism does in fact cause wealth. In the meantime, I offer this you this quip to use when debating Republicans who complain about the dire need for more tax cuts: It’s our money, we can promote the common weal by giving it away via a progressive tax system if we want to. If you don’t like it, lower the average Blue state tax bill by $3,000 and raise the average Red state tax bill by $3,000. I think that’s a great answer to some moron saying “move to Cuba”.
P.S. An exact Bush quote, from an October 2000 debate between Bush and Gore: “I want to get a better rate of return for your own money than the paltry 2 percent that the current Social Security trust gets today.” In that debate, Bush made the same point in slightly varying ways a number of times (Entire transcript here).
P.P.S. Note to math geeks: yes, I used median income as the average, because that’s what I found easiest on the census.gov page. In general, the median of the income distribution is below the average, so take this as a back, or perhaps two sides, of the napkin post. “Average Median Household Income” is computed as SUM(median incomes*populations)/SUM(populations), separately for Red and Blue states.