Do taxes matter when it comes to employment growth?


In the world of policy, there’s no more hotly debated issue than this.  With state governments (and many adoring media outlets) continually arguing that governments don’t have enough money to do all the wonderful things elected officials and their appointed bureaucracies want them to do, increased state government revenue from increased tax burdens will likely continue to be the marching song from both left and right-wing bureaucracy lovers for, at the very least, the next few years.

But, what do the data show on taxes and employment growth?  Well, here are data, and please take note of this caveat: the plots are the raw results in video form over time.

Now, academics will debate ad nauseum the causes of the observed negative correlation between taxes and employment growth.  Some, likely most, will find various theories to explain why higher tax burdens do not cause lower employment growth.  All of these theories are contrary to the observed correlations.

To outside observers, it comes as no surprise that most of academia would try to dismiss any raw empirical results regarding a negative relationship between taxes and employment growth because, after all, where does academia get its support from?

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