Graph of the Day: Jobs and Taxes

We need jobs. Even if stocks do well and GDP increases, we can't say we're doing well until more people are in the workplace.

Recently, I looked at corporate profits as a share of the overall economy (summary: they keep going up). However, these profits haven't translated into jobs. This runs counter to conservative supply-side economic theory that assumes lower corporate tax rates translate into higher profits, and that higher profits translate into jobs.

This leads me to today's graph.

(Unemployment data from St. Louis Federal Reserve; corporate tax data from OMB)

The blue line is the unemployment rate. You'll notice it spikes up and down, and that it has—if anything—a general upward trend. The reality it represents is too familiar for too many citizens.

The red line is how much corporations paid in taxes as a percentage of the overall economy. Remember how corporate profits kept going up as a share of the economy? Turns out their taxes are going down as a share of the economy.

How could this be, especially with conservatives complaining about the corporate tax rate being so gosh darn high? Well, it helps a lot that the corporate tax code is holier than Swiss cheese. While the official tax rate may be high, the actual tax rate that many of the biggest companies pay is much, much lower.

It sure looks to me like corporations are making more money, paying less in taxes, and not creating jobs in the bargain.

Let's backpedal to that unemployment line. You'll notice that it goes through a lot more variation over time than the corporate tax share (or corporate profit share). Could it be that jobs are affected by more than just the tax rate?

The answer is, “Of course they are!” Progressives have known this for a long time, and most policymakers used to as well. We need to keep amplifying the call for investment in our schools and communities. A majority of the country already supports raising more government revenue; we just need to keep hammering that message over and over again until the media and our policymakers get it through their heads that there will be political consequences for sticking to conservative lower-taxes/cut-spending ideology.

Posted in Economic Development | Related Topics: Corporate Business  Graphs  Economic Inequality  Business Tax 

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