A friend of mine posted the following chart on Facebook with the caption: "Clearly lower taxes isn't the cure."
Sorry the graph gets cut off. In case you can't tell, the red line is the supposed effective tax rate of the rich, and the blue line is the unemployment rate
My first obvious thought is that correlation does not equal causation. It’s obvious that cutting taxes do not cause unemployment. But which angle(s) should I take; regulation, business cycle, interest rates, debt, unemployment benefits, minimum wage…? Also, I’m not sure I believe the chart. Does anyone have contradicting data?
Well you have the right idea. Because economic science is not positivistic, data can be made to say anything if you torture it sufficiently. This means, however, that you can't really use data youself as proof of what you are saying, but merely (if at all) to illustrate the theory. The illustration is nevertheless somewhat irrelevant, since there are no constants in economics and only variables. Point that out. Ultimately it is theory that is all important in these disputes, so just point out the ill-effects of taxation (and strangulation aka 'regulation') on unemployment and leave it at that.
I'm certainly no expert in economics, but my common sense approach says we need more details. It seems like it might be a span of 10 years? Is it a national demographic? How did they get the results? It could be a similar logical process to the Obama administration "saving or creating 2.5 million jobs" when they account for temporary green jobs, etc.... I would just wonder if this is cross-industrial, or is this a specific industry? Too few details to really tell what the real trend is.
Great, thanks for the help!
Just send him this, along with the comment "clearly, fewer pirates isn't the cure."
Ha ha ha. Great chart!
Taxes were lower when they were higher.
The Anarch is to the Anarchist what the Monarch is to the Monarchist.
Well, first of all, the figure for unemployment is pretty inaccurate:
Unemployment wasn't constantly rising while tax rates for millionaires were constantly falling. In fact, the numbers wouldn't look significant at all if it weren't for the last year included being 2009. And even then, you'd have to argue that the recession was caused by lower taxes for it to even matter what the correlation was between tax rates and unemployment. That graph obviously wasn't made using the actual statistics.
And the "red line" isn't completely accurate, but it paints the right picture:
The "rich" have been paying a lower effective rate. So that means they're paying less taxes and contributing less to the "general welfare", right? Only if you suck at math:
Revenue doesn't come from simply raising tax rates, but is instead a function of rate times taxable income. So while rates fall from about 23% to 17% for the "top 400" from 2002 to 2007, incomes go up by about 3.6x, meaning approximately, let's see:
17 divided by 23 times 3.6 = . . .
2.7 times as much (inflation-adjusted) revenue from the "top 400"! But I thought they were paying less in taxes? Well the taxes might not have been as much of a burden, but "society" certainly got more of it. So everyone wins, right? Not if you subscribe to the mythology that inequality means "the 99%" lose while "the 1%" fill their pockets and dance on yachts while they play blackjack with hookers. Or something of that nature.
Drastically rising incomes for the rich, coupled with slightly lower tax rates, means more revenue for the government. And for most people who will even be complaining about the rich making a lot of money that should be a good thing. It should also not be forgotten that taxes fall sharply because of the recession (because people are making less money), not the other way around. Lowering taxes doesn't cause recessions. Recessions lower revenue because people make less money.
Well, at least we know now where he got it from.
Thanks for the info Rorschach!
So did your friend say anything back? Or crickets?