Comments on: Occupy the tax code Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 By: jtfane Wed, 14 Dec 2011 20:52:24 +0000 @Concerned11 and @Dollared, I have actually calculated the correlation between unemployment figures and several federal tax statistics, though unfortunately not state taxes. There actually is some moderate correlation between the two, only thing is that it happens to be negative. That’s right, higher taxes correlate with lower unemployment. Here are the numbers (all correlations are with federal unemployment figures from the BLS web site):

Effective Federal Tax Rate for top 1% (1979-2006): -0.5

Top Marginal Federal Income Tax Rate (1953-2008): -0.2

Corporate Tax Revenue as Percentage of GDP (1953-2006): -0.5

Total Effective Federal Tax Rate (1979-2008): -0.4

Of course correlation does not mean causation so one could not draw the conclusion that higher taxes cause lower unemployment. However this certainly destroys the myth that higher taxes cause higher unemployment as that simply has not been the case over the past sixty years. I think it is also worth noting, anecdotally anyway, that federal taxes are at the lowest levels they have been in decades and unemployment is near the highest it’s been during that same timeframe.

What’s even more telling is to look at federal government tax revenues as a percentage of GDP vs unemployment over presidential administrations. Going all the way back to Eisenhower, unemployment was at 3% the year before he took office (1952) and federal tax receipts were 19% of GDP. By the end of his last term tax receipts had fallen to 17.9% of GDP and unemployment had risen to 5.5%.
Tax receipts remained nearly the same over the Kennedy/Johnson administration ending up at 17.7% of GDP in ’68 while unemployment had fallen to 3.6%.
Tax receipts fell slightly over the Nixon/Ford administration (though they initially increased substantially to 19.7% in the first year, when unemployment fell to a historic low of 3.5%) to 17.2% of GDP while unemployment rose to 7.7%.
Tax receipts rose during Carter’s term to 19% of GDP while unemployment fell slightly to 7.2%.
Tax receipts fell during Reagan’s presidency to 18.2% of GDP while unemployment fell to 5.5%.
However Bush I doubled down on the falling tax receipts which ended up at 17.5% of GDP while unemployment increased to 7.5%.
Tax receipts increased significantly during Clinton’s presidency to 20.9% of GDP while unemployment fell to 4.0%.
Then Bush II again cut tax revenues to 17.6% of GDP and we all know what happened to unemployment.

Given this information it is simply absurd to suggest that lowering taxes will lead to lower unemployment or that raising taxes will lead to increased unemployment. History has clearly shown the exact opposite to be the rule. Then again not many people are likely to let a little data get in the way of their ideologies.

By: Dollared Wed, 14 Dec 2011 18:50:42 +0000 Concerned 11, could you show any evidence that there is a correlation between state tax rates and unemployment? For example, Massachusetts has lower unemployment and higher taxes than Texas – and the average income in Massachusetts is 25% higher.

By: Concerned11 Wed, 14 Dec 2011 02:31:15 +0000 California has the second highest official unemployment rate, but many of us know better. It is only a matter of time before California will have the highest official unemployment rate in the nation.

Governor Brown’s tax plan will further exacerbate that problem. California needs lower taxes and less unemployment and not more taxes and more unemployment.

By: h4x354x0r Tue, 13 Dec 2011 19:03:21 +0000 Personal income taxes should be composed of 2 opposite parts: Start with a flat tax (say, 20%), then, impose the actual US income curve on top of it, in a revenue neutral way, with the highest earner paying twice the base flat tax rate (in this example, 40%), so that all other taxes are proportionally less. No breaks, deductions, rebates, any of that BS. It’s simple enough it the entire law could be written on a single page, and it would be entirely self-adjusting.

If the bottom of the tax bracket hits zero before the top hits double the base, then the top gets a tax break. It would encourage a little less excessiveness at the top, and a more substantial base in the middle.