I know that there are K&K readers who make such aversions, but keep reading anyway. You might not be into politics, but I know you're into getting a paycheck and having a job. This means you're into taxes and the unemployment rate. (If you're not, you ought to be.)
Two editorials from the WSJ (not online free, so I'm transcribing them here from the dead-tree version) speak directly to these two issues. Listen up, especially if all you know about the economy is from Old Media.
Friday, October 6, 2006
"Tax Tidal Wave"
. . . the government will soon report that the federal budget deficit for the just-completed 2006 fiscal year fell to about $260 billion. . . . The main cause of the deficit decline . . . is a tidal wave of tax revenue. Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history.Monday, October 9, 2006
One place it has come from are corporations, whose tax collections have climbed by 76% over the past two years thanks to greater profitability. Personal income tax payments are up by 30.3% since 2004 too, despite the fact that the highest tax rate is down to 35% from 39.6%. The IRS tax-return data just released last month indicates that a near-record 37% of those income tax payments are received from the top 1% of earners -- "the rich," who are derided regularly in Washington [and the Media -- macon] for not paying their "fair share."
As for the budget deficit, at $260 billion it is now about 2% of our $13 trillion economy, well below the 2.7% average of the last 40 years. . . .
"The Worker Rally"
The Labor Department released its September jobs report on Friday. . . .[it reports] an upward revision of 810,000 previously undetected jobs that Labor now says were created in the U.S. economy in the 12 months through march 2006. . . . That's a lot more than a rounding error, more than the number of workers in the entire state of New Hampshire. What's going on here?Feel free to bookmark this entry, and come back to it when you hear someone telling you that lowering taxes harms the country & tax revenues. It looks like it's just the opposite. Lower taxes and companies can do more, become more productive, higher more people, and have more income to be taxed. Also, raising the minimum wage, which perhaps ought to be considered a kind of increase in business taxes, is not the way to get more workers more money. The answer to increasing paychecks is to have a tight labor market, where workers are valued higher in the marketplace.
Our hypothesis has been that, due to the changing nature of the U.S. economy, the Labor Department's business establishment survey has been undercounting job creation from small business and self-employed entrepreneurs.
The news here is that the U.S. has a very tight labor market -- which is now translating into significant wage gains. Over the past 12 months wages have climbed by 4%, which is the biggest gain since 2001 and which economist Brian Wesbury points out is higher than the 3.3% average annual wage growth of the last 25 years.
This boom in employment started in August of 2003, roughly coincident with the economy's growth acceleration in the wake of the Bush Administration's 2003 tax cuts on dividends, capital gains and in the top marginal income rate on the highest earners. [Which also increased tax revenues! See above. -- macon] Yet on the same day that the Labor Department discovered 810,000 new jobs, Nancy Pelosi promised that if she becomes Madam Speaker next year, within 100 hours of taking the gavel the House will vote to repeal those tax cuts and raise the minimum wage. Never underestimate the ways that Washington politicians can do economic harm.
UPDATE: to note that the WSJ is not at all happy with the way the Bush Admin has grown the federal budget & other federal bureraucracy. They comment on it in the article but for brevity's sake, I redacted it. Their comments amounted to noting that Tax Revenues are up, jobs are up, the federal deficit % of overall economy is down, even though Republicans in general had grown the federal government by a record breaking amount.
UPDATE Part Deux: to add the appropriate caveats - I know this isn't a knock-down drag-out argument proving beyond a doubt the causal relationship between lowering taxes and raised tax revenues. But, it seems quite clear to me that the correlation is a powerful one.