THE TRUTH ABOUT TAXES: History Suggests High Tax Rates On Rich People Do Not Hurt The Economy

[Igel]

9. Consider the following.

Through the '50s and '60s, tax rates fell.

At the same time women started to hit the workforce in large numbers. Unemployment didn't skyrock. There were recessions, but overall the "structural" unemployment rate was about the same.

In the '80s tax rates fell. As we were coming out of a recession, one that didn't seem to producing jobs very quickly. Structural unemployment rate was again achieved.

Tax rates continued to fall slightly, overall. In the Clinton second term they increased, but stayed far below historic levels. "Structural unemployment," that number that hadn't been breached for decades, was squashed. Unemployment fell to near-record lows.

Bush recession was greeted with slightly lower taxes. It was a mild recession. Unemployment returned--gradually--to very low levels.

This is all post hoc. No causality is shown, just correlation. On the other hand, the counter-assumption seems to be that if tax rates are lowered then unemployment has to go low and stay low and the usual consequences of recessions have to be ignored. In fact, we had recessions with high tax rates and low tax rates, even with no income tax rates. The level of argumentation has to be higher, and in economic journals it is. But still there are some nasty assumptions that have to be made about the economy, consequences of changes to a very complex and chaotic system, about human nature and the role of culture and cultural changes in society. Until we nail those things down as iron-clad facts, there will always be competing assumptions and ultimately a lot of economics becomes models that predict the past and, only if the assumptions are right, the future.