Monday, August 15, 2011

Tax Rates & Job Creation

Three things happened this morning that prompted me to write this post. First, a friend of mine commented on my previous post by stating that raising taxes during a recession is a bad idea. Sounds like common sense. Then I read in the Tribune about an interview with Michele Bachmann.  "We have to lower tax rates considerably on job creators. And with everything from the death tax to alternative minimum tax to 100% expensing immediately for small business,” she said on Fox News Sunday. When asked about extending unemployment benefits to regular people she replied: “I don’t think we can afford it.” OK, so we know where her priorities lie. Then I read the article about Warren Buffet. He said that we need to stop “coddling” the mega rich. He claimed that higher tax rates will have little effect on investment and job creation.
I decided to do a little digging to see if I could find some numbers and see if there’s any correlation between top marginal tax rates and unemployment. I googled “tax rates by year” and clicked the link to the National Taxpayers Union ( Their tagline: “America’s independent non-partisan advocate for overburdened taxpayers.” I might have agreed with the non-partisan part if they had left out the “overburdened” part, but I’m guessing their numbers are good. I also googled “unemployment by year” and got the Bureau of Labor Statistics ( Their website shows unemployment by month, going back quite a ways. Here’s what I found:

Year(s) Top Marginal Tax Rate Average Monthly Unemployment Rate
1954 - 1963 91% 5.4%
1964 77% 5.2%
1965 - 1967 70% 4.0%
1968 - 1980 70% or more 5.9%
2001 39.1% 4.7%
2002 38.6% 5.8%
2003 35% 6.0%
2004 35% 5.5%
2005 35% 5.1%
2006 35% 4.6%
2007 35% 4.6%
2008 35% 5.8%
2009 35% 9.3%
2010 35% 9.6%
2011 (so far) 35% 9.0%
Does this mean that if we raise taxes we’ll lower unemployment? NO! It means that Buffet is right – that the relationship between taxes on the richest and jobs is non-existent. The rich aren’t big job creators anymore anyway. Hedge fund managers don’t employ many people. Most of the industries that employ enough people to make a difference have decided that manufacturing is best done outside the United States – and taxes had little to do with that decision.
Next time you hear a candidate talk about the evils of raising taxes on “job creators” ask for some proof! Conversely, when a politician says that we must raise taxes to create jobs – ask for proof! Don’t just take the sound bites at face value – politician talking points usually have little substance. Demand more!


Mark Juric said...

Here! Here! You absolutely nailed it. Wealth != job creator by any stretch of the imagination. I have an aunt who's a multi-millionaire. The only jobs she creates are for the guy who cuts her lawn and the lady who cleans her house. When I have the cash, I create the same number of jobs.

Debutopia said...

Love it! I was in the middle of writing a blog entry about the Buffett article when I flipped over to Facebook and saw the link to your blog post. Brilliant. Is it alright if I create a link from my blog to yours? I want some folks to see this . . .

Anonymous said...

as if facts have anything to do with politics and most especially, the GOP.

Underemployed said...

Right directly ON, Kevin! The wealthy are just keeping it all to themselves right now, as we spiral into the rich/poor culture of a third world nation.

Oh, well. Good thing I wrote down my grandmother's depression era recipes.