Newsbusters reports that government revenue for June '09 is down 9.8% from June '08. Now I'm sure the relationship between employment and revenue is vastly more complicated than I am perceiving it but, to take a simple-minded peasants view:
Revenue is equal to the number of peasants toiling times the average tax rate imposed on their earnings.
R = E*t
Let Revenue in June '08 (R1) = 100
In June of '08, unemployment was 5.5% so the employment rate was 94.5%
100 = 94.5 * t so the effective tax rate would be 1.0582
Note that the total revenue and the total population don't actually matter since we're only comparing percentages here.
If Revenue in June of '09 (R2) = 90.2, and the tax rate is unchanged, then the percentage employed becomes 90.2/1.0582 = 85.239, which implies a 14.8% unemployment rate.
I know that other factors affect these numbers. At the last place I worked, the main workforce took a 20% pay cut in lieu of layoffs, and I stand by my previous prediction that the rate for June will be 9.8%, but how would that square with the announced revenue drop?
Subscribe to:
Post Comments (Atom)
2 comments:
Billll, You made a couple of rash assumptions. One is that each peasant contributes the same unit of peasant income, another is that peasant tax is levied at the unit peasant income level, that is at a uniform rate.
The reality is that putting several executive peasants out of work, by, say, firing the GM CEO and turning the company over to the unions, you lose millions more peasant earnings than shutting down bunches of McDonalds (which don't make enough money to interest B. Hussein Obama).
And those millions of peasant-equivalent incomes lost were being taxed at 20 times the effective tax rate, after deductions.
Then there are the companies that no longer make money and thus pay less taxes, and the companies that accelerated moving away from punitive taxes and regulations by shifting divisions and operations across the borders and overseas.
You also assume that many unemployed peasants aren't spending anything, when at least at first many were spending unemployment money, and savings, and running up credit debt. That is, expending assets it will take a decade or more, nationally, to restore.
And I am not sure your model includes the loss of tax revenue on stock market investments - since there were so many offsetting losses. And no one is paying taxes on collected mortgages that aren't being paid, so that revenue stream has dropped by some amount.
Government statistics aside - like counting applications for unemployment as the actual number of people unemployed, instead of reporting the number of people that don't get unemployment, that didn't find work when the unemployment insurance ran out, etc. - you might consider your 14% number "effective unemployment impact" as an economic measure.
And I feel compelled to point out, that increasing taxes and regulations on corporations and business owners - has the same impact as increased unemployment. Less money is available in the economy, prices rise without productivity improvements, and corporate and business taxes often contribute company costs relieved by - laying off employees.
B. Hussein Obama has pledged to "redistribute wealth" (steal from the rich, to benefit . . . um, Chicago?) and that means the impact of his policies has fallen heavily on the peasants making more money - and the loss of the disproportionately high ratio of big wage earners has a disproportionately high impact on the economy - and on the ability of the economy to recover.
Thanks for the basic economy lesson! Have you sent a copy to The Honorable Nancy Pelosi, yet?
I will freely admit to having made a bunch of rash assumptions in the interest of popping up some kind of number that might be used as a starting point.
1 unit of peasant income is certainly not the same across the board, but think of this as an average peasant, who makes enough to actually be paying taxes. In this sense, the ones making too little to be paying anything at all just drag the average down.
Corporate income amounts to 12% of federal revenues. A corporation can make no money at all, and be running along doing whatever it's doing. The more successful ones hire accountants to insure exactly that.
The article I cited mentions a lot of sources for federal revenue, but I limited the calculation to individual payroll and income taxes. Income would include profits made from market trades, but only when a trade is actually made.
The definition of "unemployed" is also suspect, as there are multiple ways of figuring this, all of which yield different results. Colorado, in the '70s had a scandal in which unemployment was defined as actually collecting benefits. When your benefits ran out, you didn't count any more. The person in charge of the employment department also adopted a policy of rejecting applications for the most trivial reasons, driving the state unemployment rate to strikingly low levels.
Complaints eventually forced an investigation, and the secretary quickly joined the ranks of the unemployed.
I'm not arguing that there's something wrong with this type of quick and dirty calculation, but asking how it should be revised to reflect reality.
Post a Comment