What if we realize that the status quo approach, even with good intentions, has had unintended consequences for RI families?
Increased government revenues are not always a positive indicator. Personal income is derived from two sources: the private sector and the public sector. The distinction between the two sectors is important because only the private sector creates new income. The public sector, in contrast, can only redistribute income through taxes and spending. More specifically public sector spending consists of personal current transfer receipts (Medicare, Medicaid, Social Security, etc.) and government employee compensation (federal, state, and local).
This information is important because there is a significant positive correlation between per household personal income and the private sector share of personal income. Put simply, the bigger the private sector, the greater the per household personal income. When examining the lower 48 states, on average, a one-percentage point decrease in the size of the private sector yields a decrease in per household income of approximately $3,300.
To read the economics section of the report, please click here.