Income inequality has been in the news quite a bit. Both Democrats and Republicans seem concerned about it. The squeezing of the middle class is a very real phenomenon. But income inequality in and of itself is not necessarily an issue, and this can be illustrated by a simple example.
Suppose we have a society of 100 people. All of them make 100 dollars per year. The income inequality in this society is zero. Now suppose we have another society of 100 people. 99 of them make 10,000 dollars per year. One of them makes 1 million dollars per year. Clearly, this society has plenty of income inequality. But the question is, are the people in the second society better off than the people in the first?
Of course they are. EVERY SINGLE PERSON is making much more. And this is the theory behind trickle-down economics. Lowering the tax burden on the wealthy aids economic growth, which trickles down to the middle class. As the saying goes, a rising tide lifts all boats.
Does it work? Well, the NON-PROFIT Institute for Taxation and Economic Policy has been studying tax rates for years. Not just income taxes – all taxes. We tend to focus on income taxes, but all of us pay other taxes – sales tax is a big one. And it hardly needs to be said that your tax BURDEN must be looked at in relation to your income.
So what did they find? In states with the most progressive tax rates, the wealthy pay about the same rate in relation to their income as the poor and middle class. Delaware, for example, ranks lowest on their index of tax inequality. The weathiest 1% pay about 4.8% of their income as tax. The poorest 20% pay about 5.5%. The middle 60% pay about 5.3%. By contrast, in Florida, the middle 60% have an effective tax rate 4 TIMES that of the wealthiest 1%.
If we plot the tax inequality index by state versus income levels, we see that there is no relationship.
Easing the tax burden on the wealthy does not increase income levels generally. It doesn’t help or hurt. This agrees with other research that shows that tax rates on the wealthy have no effect on economic growth.
Progressive versus regressive taxes also don’t seem to have any effect on income inequality, at least not on a state-by-state basis. One of the most common measures of income inequality is what is called the Gini index. If we look at the tax inequality versus the Gini index by state, we get this:
If you’re wondering why the tax inequality index is almost always negative, it’s because in every single state the wealthy pay less of a percentage of their income as tax than the poor, and in virtually every state (California is the only exception), less than the middle class. But taxing the rich more just doesn’t seem to put a dent in income inequality.
So what DOES affect income inequality? Well, if we look at income inequality by county rather than by state, we see a very noticeable pattern:
Income inequality is generally higher in the South than in the Midwest and Northeast. In rural areas of the Northeast, the Midwest, and the west coast, income inequality is generally low. Yet the opposite is often true in the South – income inequality is often greatest in rural areas.
The reason has to do with the history of the South. If we look at a map of religious affiliation, we see a striking pattern.
Baptist churches dominate most of the South, including much of Missouri, Kentucky, and West Virginia. The Catholic church dominates the Northeast and much of the Midwest.
The Southern Baptist church was the church of the slavemasters. It is no accident that to this day many of the descendants of slaves belong to Baptist congregations; the slavemasters indoctrinated their slaves into their religion. But it was also the church of poor southern whites. Unlike the Methodists, the Baptist church embraced slavery and used the Bible to justify it. Needless to say, this did not sit well with many slaves, and after the Civil War, most African Americans left white Baptist churches to form their own Baptist congregations.
In the early 20th century, the Baptist church and other “mainline” churches were becoming too “modern” for many church leaders, and Pentecostalism was born. Pentecostalism siphoned off many southern Baptists. Today Pentecostals are concentrated in the South, particularly Arkansas, Oklahoma, and southern Missouri.
Now let’s look at education levels. We can look at this in a couple of different ways. First, there’s the high school graduation rate:
Or, we can look at the average number of years of secondary and post-secondary education:
Or, we can look at the percentage of people who have Bachelor’s degrees:
But no matter how we look at educational attainment, we pretty much get the same result. The maps are strikingly similar to each other, to the map of religious affiliation, and to the map of income inequality. The areas dominated by the Baptist church tend to have low levels of education. In Iowa, where Lutherans, Methodists, and Catholics predominate, people average 3-6 years of secondary and post-secondary education. By contrast, in southern Missouri, where the Baptist church reigns, they average less than a year and a half.
Am I suggesting that Baptist and Pentecostal churches put less emphasis on education than Lutheran, Methodist, and Catholic churches? I’m doing more than suggesting it. Here are some hard facts:
Only 16% of Pentecostals and 22% of Baptists are college graduates. By contrast, 33% of Catholics, 36% of Lutherans, and 36% of Methodists are college graduates. Among Jews the percentage is a whopping 58%. These are not accidents. They reflect CULTURES. Religious fundamentalism is inherently anti-science and anti-intellectual. Southern whites have been fed a steady stream of religious fundamentalism by their church leaders, along with white supremacy, and just for good measure, a heavy dose of unbridled capitalism. And this is really the key.
Prominent figures in the white Southern Baptist church have always been local business leaders. During much of the 19th century they were planters. As extractive industries such as timber, oil, and coal began to spread across the South, many of them became barons of these industries, others financiers. The church was a way of maintaining business ties. But it was also a way of indoctrinating working class whites. It is no accident that important southern businessmen like John Kirby (timber, oil) and Vance Muse (oil) formed organizations with names like the Christian American Association to fight labor unions and at the same time, promote racial prejudice. White supremacy, anti-communism, and anti-labor were a complete package, aimed right at propagandizing southern working class whites. A classic example of this is the “Common Citizens Radio Committee,” run by Senator W. Lee O’Daniel of Texas, so-called “Pass-the-Biscuits Pappy.” A propaganda machine that portrayed itself as the voice of farmers, ranchers, and grocers, the U.S. Congress, with considerable difficulty, was able to track down its biggest supporters: H.R. Cullen, owner of an oil company and a coal company; Kay Kimbell, owner of a large milling plant; Thomas Armstrong, owner of multiple oil companies; Maco Stewart, owner of multiple loan and hotel companies; and a long list of similar big business contributors.
A great deal of this white supremacist, anti-labor effort was directed at Franklin Roosevelt’s New Deal. Many of the leaders of the Ku Klux Klan were prominent southern businessmen and most of them were prominent Baptist church leaders. The message they repeated time and time again was that Jews were joining with southern blacks to impose godless communism and black supremacy over working class whites. Is it any wonder that the working class whites who grew up in those churches, generation after generation, bought into the message of white supremacy and the worship of the free market?
The National Council of Churches, which advocates racial and gender equality, disarmament, and social justice in general, contains a number of Baptist churches. Two of them are the American Baptist Churches, USA (headquartered in Pennsylvania) and the National Baptist Convention, USA (primarily African-American). These should not be confused with the Southern Baptist Convention, the largest Baptist church in the world, which is not associated with any council of non-Baptist churches. The very reason this church exists is that it broke away from the northern Baptist church on the issue of slavery.
This connection between the white Baptist church of the South and southern racism is seldom discussed. What it has done is keep southerners, white and black, from having good access to higher education, and in many cases actively discouraged them from it. Educated people are less easily bamboozled, less easily exploited. It has kept wealth concentrated in the hands of a few. It has kept southern economies focused on agriculture and extractive industries, like oil, coal, timber, and paper, rather than diversifying into information and advanced technology, which would demand educated employees. It has sent a message to southern whites – you don’t need higher education. You just need to work hard and stop having to pay for lazy black parasites, who are backed up by communistic Jews.
To this day the gospel of the glorious free market and the lazy welfare queens is being promulgated across the South to white working class ears, and has spread to working class whites throughout the country. It is by no means restricted to the churches, but slavemaster churches remain excellent organizing tools for white southern businessmen and politicians, who are often one and the same. While overt racism has become socially marginalized, covert racism is in many ways stronger than ever. Increasingly, southern whites are encouraged to believe that it is whites, white males particularly, who are disadvantaged. Increasingly, southern whites are being encouraged to view the browning of America as a “threat to the American way of life.” How convenient for those who get to pay low taxes and crappy wages.
What predicts income levels? Education. The average American with less than high school makes only $488/week. With only a high school diploma, $668/week. With a Bachelor’s degree, $1101/week. With an advanced degree, $1386/week, more than double that of an American with only a high school diploma. If we look at educational attainment by state, it looks like this:
If we look at median household income by state, it looks like this:
They look pretty similar, don’t they? And in fact, if we plot educational attainment by state versus median household income, we get:
A strong relationship. States in which people do well are states that have invested in education. These are not necessarily wealthy states. New Hampshire, for example ranks 17th in per capita GDP. But it ranks number 1 in median household income. Wanna know where it ranks in educational attainment? Number 1. By contrast, Texas ranks 19th in per capita GDP, but 26th in median household income. And in educational attainment? 50th.
Why does New Hampshire rank so high? It isn’t just that Dartmouth College, one of the highest-ranking universities in the country, is there. In 2008, New Hampshire high school students tied with those from Massachusetts in having the highest SAT scores in the country. Clearly, people in New Hampshire are serious about their childrens’ education. If we look at education expenditures per student by state, we see a familiar pattern:
States in the Northeast tend to put more money into education. States in the South invest much less. In Louisiana, education expenditure per student is $10,749 (which is actually higher than in most southern states). In New Hampshire, it’s $14,335. In Massachusetts, $15,087. In Connecticut, $17,745. Connecticut’s expenditure is more than double that of Misssissippi ($8263). Is it any wonder that the median household income in Connecticut is $72,889, almost double that of Mississippi’s $40,037?
More telling than total household income is real personal income – the amount of money available to people after taxes and other basics are taken care of. If we look at educational expenditure per student by state versus real personal income, we get this:
The green dots are all northeastern states. The red dots are all southern states. Some of these southern states have tremendous natural wealth. The state of Louisiana produces more than 40 million barrels of crude oil per year. The state of Connecticut – NONE. Louisiana spends $10,749 per student on education. Connecticut – $17,745. The average real personal income in Louisiana is $42,207. In Connecticut – $54,703. More than $12,000 more. 9 out of the 14 southern states fall below $40,000 in average real personal income. 10 out the 11 northeastern states are above this.
Education is the way up. Education is the way out. The myth of “hard work” has never been applied to education in the South. Instead, it has been used to paint southern blacks as lazy parasites, while ensuring that southern working class whites are kept ignorant and destitute. The solution to income inequality is an emphasis on education and an investment in education, as well as strong labor unions to negotiate good wages and benefits. There are no quick fixes and no excuses. America will never go back to the labor-intensive manufacturing of the mid 20th century, which provided tons of good-paying jobs to people without college degrees.