How Tax Cuts Play Out County by County
A Patchwork Nation Analysis
Tuesday, December 07, 2010
As the debate over extending the Bush-era tax cuts plays out in Washington, an important element is being left out of the debate—geography.
This tax cut debate has a similar sound to others in Congress. Republicans back extending the cuts for everyone, including those making over $1 million because "a rising tide raises all boats" and "wealthy people create jobs." Democrats argue the breaks should go just for "middle class families" and "the poor," because those groups tend to spend the money and they need it.
And all of this, of course, is set against the backdrop of a ballooning deficit where the federal government simply has less to spend. But lost in all those talking points is where the money actually goes.
Patchwork Nation sees wide disparities in where the wealthy live by county, and in our 12 county types, and those disparities show how the tax cut extension for all may miss the mark when it comes to getting past the lingering effects of the longest economic downturn since the Great Depression.
Why? Because even in the age of the integrated economy there are sharp differences in the 12 county types Patchwork Nation studies. And those differences are highlighted even more when one looks at where the wealthy are.
The more likely result from a full extension? Some wealthier places that already look like they may be turning a corner would arguably get a more assured road to recovery by extending the tax cuts for the wealthy, but the idea that those cuts would also do much to aid struggling communities is harder to see.
Following the Money
Currently Congress seems to be adjusting to an idea of a compromise between Democrats and Republicans that would extend all of the Bush administration's tax cuts to all income levels in exchange for an extension of the time unemployment benefits are available.
So what impact would extending those upper-income cuts have? One would expect that a big beneficiary in Patchwork Nation would be the wealthy suburban communities we call the Monied Burbs. Those places have the highest median household incomes of any of our 12 types.
And that does seem to be the case.
Consider Westchester County, the well-known Monied Burb of New York City where more than 10 percent of the households earn more than $200,000 a year - so it's safe to assume a fair number earn at least $250,000. Extending the break those earners receive would arguably stabilize them.
But go a little north at look at the Service Worker Center of Ulster County: there only 1.4 percent of households earn at least $200,000. North of Ulster the Service Worker Center counties of Delaware and Otsego have even fewer wealthy $200K-plus households - both .96 percent.
How much will the tax cut extension for Westchester's wealthy mean for those more rural Service Worker counties? Probably not too much - not immediately. Unless the small businesses in those more distant counties are owned by people in Westchester, and those particular small business owners hire more people because of the tax cuts extension.