Do lower taxes explain the unemployment rate?

Discussion in 'Economics' started by nitro, Jul 15, 2010.

Do we oversimplify the correlation of taxes and employment effect?

  1. Yes. It is very difficult to tell whether tax cuts help employment or not.

    2 vote(s)
  2. No. Lower taxes eventually leads to higher employment.

    3 vote(s)
  3. I don't know.

    0 vote(s)
  4. I don't care.

    0 vote(s)
  1. nitro


    "...Engen cautioned that total tax takes are affected by economic growth as well as tax levels. A booming economy -- driven not just by tax issues but also by interest rates, trade policies, inflation rates and other factors -- will pump money into the government's coffers as it pushes unemployment down, he said.

    Still, Burtless noted, some prominent conservative economists, including Harvard University's Martin S. Feldstein, predicted wrongly that the Clinton tax cuts would choke off the 1990s recovery and kill jobs, while the millions of new jobs that Bush said his $1.7 trillion in tax cuts would generate have not materialized. The historical disconnect does not stop there...."
  2. Daal


    Lower taxes(up to a point) help employment because the private sector is more effective in allocating savings into productive investments compared to the government most of the time. To argue otherwise is to stay a Soviet style country has a higher rate of output per hour(productivity) than a US style economy, which was not the case in the 20th century
  3. Maybe we could informally look at cities with the lowest unemployment rates and correlate the tax rate of those cities.

    Economists may be barking up the wrong tree with this simple idea.

    Unemployment stats are consistent? Ie cenus workers as the most recent number distortion.

    Taxes, another distortion. Taxes are chameleons and may have changed shades. Fees, etc. (Is medicare a tax? Comes out of payroll?)

    If the cell phone is taxed but pass along to the customer as not a tax. Is this recorded as a tax per the economist to my business?

    Too many variables to make a simple correlation.