"This paper argues that, for a given overall level of labour income taxation, a more progressive tax schedule reduces the unemployment rate and increases the employment rate. From a theoretical point of view, higher progressivity induces a wage-moderation eff ect and increases overall employment since employment of low-paid workers is more responsive. We test these theoretical predictions on a panel of 21 OECD countries over 1998-2008. Controlling for the burden of taxation at the average wage, we show that a more progressive taxation reduces the unemployment rate and increases the employment rate. These fi ndings are confi rmed when we account for the potential endogeneity of both average taxation and progressivity. Overall our results suggest that policy-makers should not only focus on the detrimental e ffects of tax progressivity on in-work eff ort."
"higher progressivity induces a wage moderation effect"
employment of low paid workers is more responsive? You're damn right. A company cannot afford to hire more workers if their tax rate cuts down their profits to virtually zero. Do you realize a lot of revenue is reinvested back into a corporation? All those "millions" that CEOs and higher ups make is needed as startup investment again.
I love how that article is from le socialists. How's Hollande working out for ya?
Two problems: 1) Their metric of progressivity is crappy. Instead of progressivity being how fast the rate goes up by income, it should be *exclusively* rated by the ratio of the percentage of total income each group receives to the percentage of contribution to the total budget. Marking the progressivity of the tax rates as anything else ignores how income is actually distributed.
2) They explicitly state in their hypothesis that higher tax rates on labor lead to greater unemployment. So their conclusion that a more progressive tax schedule empirically leads to lower unemployment is not a result of the progressivity, but rather that the countries with more progressive tax schedules have a zero to slightly negative effective income tax rate on about 50% of all laborers. Nothing to do with progressivity and everything to do with low tax rates on labor.
In short, the study says "you pick the conclusion, and I will find the way to analyze the data that tells you what you want to hear."
The economy has room for X number of employees based on the consuming power of the public. That has far more to do with the chosen rate than the progressiveness in the structure.
They claim is that if the personal income tax structure is changed, then corporations (whose are taxed differently) will hire fewer people? The economy will keep up with the demand, and if fewer people consume, then fewer people will be hired...but that is a function of available funds, which again, is a function of rate...not progressiveness.
I think there are some invalid cause-effect conclusions are being made in their theorizing.