Higher Taxes Lead to Higher Job Growth?

Of course not. But thats what one liberal advocacy group is trying to claim.

I’ve been talking for years about the importance of lowering this country’s exorbitant corporate tax rate. It would be a useful prescriptions for pulling us out of the last half decade’s unemployment rut. Although there are a variety of sides to this argument (and I have long advocated for more aggressive measures), almost everyone seems to agree that revenue-neutral corporate tax reform is the minimum standard for improving the jobs situation in this country.

Considering this – and the fact that tax reform has finally started to gain steam for potential consideration in early 2014 – it makes a a recent released and amazingly flawed report all the more newsworthy. The report, by the Center for Effective Government, advances the amazingly absurd idea that a higher effective tax rate leads to more job growth. The report is a living proof of the similarity between “lies, damned lies, and statistics.”

The thrust of the report’s findings is the correlation between companies that pay a high effective tax rate (above 30 percent) and those which have added jobs since 2008. Similarly, the report also tries to draw a correlation between firms with low effective tax rates and those which have shed jobs in the same time period. There is no attempt, however, to take into account any other factors that could have played into these respective trends.

Primary among them, of course, is the Great Recession of 2009, which hit industrial firms and jobs much harder than their retail counterparts. The much publicized shift from manufacturing and industrial to retail in the American economy is not even mentioned.

Clearly, the Center for Effective Government approached this report intending to use their facts as a drunk uses a lamppost: for support, not illumination. Their findings and recommendations are a dramatic outlier from almost all reputable work on the subject, and their research is clearly inadequate to support such a claim. Policy on this subject has a long way to go before we solve America’s unemployment crisis, but unfortunately the Center’s report is too flimsy to advance the discussion in a meaningful way.