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Posted at 8:44 AM ET, 02/25/2011

How do unions affect state spending and taxation?

By Ezra Klein

Two interesting graphs from Barry Pump. The first looked into whether there's a clear correlation between union density and the progressivity of a state's tax system. There wasn't:

uniontaxes.png

This next graph is slightly confusing: it's looking for a relationship between union density and social welfare spending, but it's designed such that a negative correlation -- so, a line sloping downward -- indicated a positive relationship between union density and social welfare spending. And as you can see, that's exactly what we've got:

unionwelfare1.png

"So there is prima facie evidence that unions may be more effective in their advocacy for how tax revenues are spent rather than the fairness of the tax burden," concludes Pump. I don't want to read too much into these two graphs, as all sorts of other factors could be driving the results (and the non-results). But the findings make sense to me: Republicans (and allied groups) place a very high priority on keeping taxes on the rich down, while Democrats (and allied groups) tend to place a high priority on keeping social spending on the poor up. So in states where unions are strong, Republicans may be putting their energies into beating back progressive tax proposals while unions and Democrats focus on pre-K education.

By Ezra Klein  | February 25, 2011; 8:44 AM ET
Categories:  Unions  
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Comments

its not membership that's the issue its their spending.

see examples here:

http://online.wsj.com/article/SB10001424052748703293204576105760131773034.html


Now to be fair these efforts as you say are counterbalanced by business's efforts to rein in taxes.

Its amazing how over the last several years its become obvious that Dems just increase taxes when they take over as Governor (Quinn, Mulloy as examples) and Republicans decrease them and attack spending (Christie, Walker, Daniels).

Just once I'd like to see a Govenor say we need to do both increase taxes to a reasonable level and decrease spending to a reasonable level.

Posted by: visionbrkr | February 25, 2011 9:53 AM | Report abuse

I wonder what percentage of "social welfare spending" is actually just further spending to benefit the public employees?
For instance, a housing program design to help "middle wage earners" which is doled out on a first come first served basis at city hall but not particularly well advertised to the general population, may look like "social welfare spending" but end up as a defacto fringe benefit for the city workers.
Or let's say that city workers, who live outside the city limits are being encouraged to live in the city that pays their wages through a housing program.... is that "a public employee benefit" or "social welefare spending?
Little things like, walking paths arrayed around city hall to benefits the workers in those buildings, transportation schemes designed to ease their travel to and from the suburbs to city hall... are these things "employee benefits" or "social welfare spending"?
Steve

Posted by: Cheesy1959 | February 25, 2011 10:51 AM | Report abuse

Interesting. The correlation is awfully weak here (you can see that in the amount of scatter). He should release the R^2, its probably less than 10%, which is to say that Union Membership explains less than 10% of the effect. Said another way, 90% of Social Welfare Spending is explained by other factors. Good try but no cigar yet.

Posted by: slysly77 | February 25, 2011 1:55 PM | Report abuse

Ezra, If you're gonna use graphs to make a point please give some data on how the graphs were generated (what line fitting routine was used) and as slysly77 pointed out, the correlation coefficients. If you don't know what that is, stay away from graphs with fitted lines. You're just hand waving in the absence of this information.

Posted by: Beagle1 | February 25, 2011 2:33 PM | Report abuse

visionbrkr: You simplify the situation too much. You mention my governor, Mitch Daniels, in way too positive of light when it comes to reining in spending. It all comes down to which entity that you want to spend money on, and where and who you want to take it away from. Mitch has done a good job of reducing employment in our state in the public sector, if you call that a good thing, yet have corresponding prices in our state reflected that? Has our sales tax went down? Has my state income taxes went down? No to both. Has the overall cost to live in Indiana went down? No. Is it cheaper for businesses to operate in Indiana? Yes. Have we seen a boom in hiring in Indiana, because those businesses operate more cheaply? No. Has Indiana businesses decided to pass their cost savings on to employees in the form of higher wages? No, if anything Indiana has went south (a pun definitely intended) on wages and benefits. How about property values? Yes, truly, how about property values? Mitch talked the legislature into legislation which caps property values at 1% of assessed valuation and businesses at 3% of assessed valuation. Should be a real boon to homeowners, right? Well guess what! Indiana is in a budgetary bind, and to keep local governments going, the local tax assessors are now talking about reassessment for individual homeowners. And you can bet that the values won't be going down, just up. Yet I wonder if businesses, with the 3% cap, will find their property values assessed higher. I doubt it. Mitch has just don a clever bait-and-switch to get the U.S. Chamber of Commerce and the Wall Street Journal on his side and evidently, visionbrkr, you've drank the Red State Mitch Daniel's kool-aid and believe too much of his bunk.

Posted by: rtinindiana | February 27, 2011 8:27 AM | Report abuse

@rtinindiana,

so if Governor Daniels had not done those measures would the taxes not have gone up? Would you prefer to live in my state of NJ which is again the highest taxed in the country?

Similarly PPACA will be considered a rousing success if it merely holds healthcare costs increases (no one really expects it to) to regular inflation instead of the standard of healthcare inflation currently at about 10% a year? So if regular inflation is 2% a year and healthcare costs rise at 5% a year instead of the current 10% a year isn't that a success? I guess it depends on who's measuring it. is it enough of a success, no probably not in the long run but it doesn't mean its a failure either.


Its amazing to me that in the healthcare sector most liberals would prefer single payer with "less hands on the pie" but in the issue of public sector wages and benefits they don't see the benefit of the same premise. So the idea is we have to give the government MORE of our money so we can get more services. Why not just let us keep the money in the first place? Why hand it to someone to take their cut and then hand us back something much less?

Posted by: visionbrkr | February 27, 2011 9:22 AM | Report abuse

Good job, Ezra!

Jourolist gibberish that looks like gibberish.

This may be the most honest thing you have every published!


Posted by: TECWRITE | February 27, 2011 9:59 PM | Report abuse

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