TAXES, PRICES & WINGNUTS

A popular wingnut economic claim is that when taxes are raised on corporations, they pass that on to consumers. I decided to do a simple test to find out if this is true. First, though, I must tell you that I left out extreme economic situations, like the Great Depression, WW II, the Vietnam War and the inflationary period after Vietnam. This left 3 periods: (1) 1914-28; (2)1946-64 and (3) 1983-2002. I used the Consumer Price Index as a measure of price changes and the top marginal tax rates for corporations.



In the first 2 periods, there was a negative correlation between taxes and prices, -0.09814 in period 1 and -0.55746 in period 2. This means that as corporate taxes rose, prices declined, and vice versa. There was a postive correlation in period 3, 0.000218, but it is so small as to be insignificant.



Here are the graphs:



RED = CPI
BLUE = TAX RATE





1914-1928



1946-1963



1983-2002