Proving causality in "lower" taxes=higher employment

[rj.phila]

i notice that it is just presumed by many people, pols and punters alike, that lowering tax rates(both corporate and individual) will spur higher employment rates. I understand the logic(even though my experiences as a small business owner are the exact opposite), but I have never seen a real, hard statistic supporting causality. If you look at the historical trends in the US, unemployment and tax rates have nothing to do with each other, at least for the last 70 years or so.

Is anyone privy to a hard stat that supports this? Not a rationalization or explanation. I want a chart, graph, real metric.

Aaaand, if not, why is this a virtually unchallenged assumption?

[bjl584]

In business, I would argue that certainty matters more than tax rates. At least to a point. If business can plan out their strategy several years in advance with a reasonable amount of certainty that certain costs will remain the same or will increase at a predictable rate, then they are more likely to have a chance at being sucessful and at hiring more workers should their business increase and expand. Uncertainty in future tax rates, labor costs, regulations and laws, and the like will often make business "hunker down" so to speak, hoard cash, and not expand or hire.

[disneysteve]

Originally Posted by rj.phila

If you look at the historical trends in the US, unemployment and tax rates have nothing to do with each other, at least for the last 70 years or so.

Aaaand, if not, why is this a virtually unchallenged assumption?

I am not an economist but I think you've already answered the question. Reviewing actual data will show that the two are not related.

Why is it an unchallenged assumption? The same question could be asked about any number of things. Many myths have become accepted as "common knowledge" even though they are false. And that applies to financial topics as well as other topics. I could tell you numerous things I run across in medicine that patients insist are true and simply are not.

[rj.phila]

Originally Posted by disneysteve

I am not an economist but I think you've already answered the question. Reviewing actual data will show that the two are not related.

so what really confuses me is this: if there is NO metric that can prove causality(i havent even seen one that implies correlation), then why do people let this pass as an assumption in the world of politics? right now, the debt and deficit are front and center in politics and the media. i swear, a week doesnt go by where i dont hear a pol trumpet that "an increase in taxes is a jobs killer", and it goes UNCHALLENGED by both the opposing party, AND the media host. why? this seems like a sitting duck argument, that would be so easy to blow out of the water.

not to mention that anyone who runs a business should know, plain as day, that the motivation behind hiring has everything to do with productivity, not taxes.

[bjl584]

Originally Posted by rj.phila

so what really confuses me is this: if there is NO metric that can prove causality(i havent even seen one that implies correlation), then why do people let this pass as an assumption in the world of politics? right now, the debt and deficit are front and center in politics and the media. i swear, a week doesnt go by where i dont hear a pol trumpet that "an increase in taxes is a jobs killer", and it goes UNCHALLENGED by both the opposing party, AND the media host. why? this seems like a sitting duck argument, that would be so easy to blow out of the water.

not to mention that anyone who runs a business should know, plain as day, that the motivation behind hiring has everything to do with productivity, not taxes.

Most of the "facts" that politicians and pundits spout on tv has no basis in reality. The example that you are giving is just one of many.

[disneysteve]

Originally Posted by bjl584

Most of the "facts" that politicians and pundits spout on tv has no basis in reality. The example that you are giving is just one of many.

Exactly. I don't closely follow politics but I always love the segment they do on the news after a big speech or debate where they do the fact checking and show that much of what was said simply isn't true.