Does Higher Taxes Cause Industry To Outsource Jobs

I posted undecided because what you're regurgitating here is certainly one theory. But this doesn't explain a lot of it, as taxes are only one part. Take Google for example, they make their income through capital gains, but they don't pay 15%, they pay an effective 2.5% tax rate by sending their income through Ireland, to the Netherlands, and then to Burmuda - which means that they don't have to outsource because loopholes allow them to maintain jobs here - or leave. When jobs are outsourced, taxes are just the excuse. People fail to realize that between the 1940 and 1960 America had the highest tax rates it had ever seen but we had a huge amount of manufacturing jobs -we were fighting three wars during this time (WWII, Korea, Vietnam).

There are a number of reasons behind why outsourcing occurs, and it's been going on since the 1700's. But the point is, under the neoclassical economic approaches profit is the number one interest. Of course this is the goal of any business, but it becomes much more exaggerated under neoclassical interpretations of capitalism. So, we can blame taxes, but that's only one part of it. Third world countries, and third parties typically don't regulate how businesses must function which means they can reduce costs, reduced costs mean that their profits may increase, or more can be spent towards investments to produce more revenue...which means more profit.

Taxes have been going up and down since we were dragged into World War II, and currently the federal taxes are the lowest they've ever been - and I think that this comparison will show that taxes are certainly one small part. If you were to compare the unemployment rate to the capital gains tax, you would get a -0.009. This is a negative correlation, it means that as one goes up, the other goes down - this doesn't support your theory. According to your theory, it should be a positive correlation, as one goes up, so does the other. But this means that when unemployment goes down, taxes go up, and vice versa. While this result is statistically significant (meaning that it didn't happen by chance), it doesn't control for anything. More importantly, -0.009 is so small, it is insignificant (as the scale is between -1 and +1). So, when it comes to Capital Gains, that doesn't explain it. On the other hand, there's corporate taxes - which the highest rate is 35%. If one were to compare corporate tax rates since 1972-2010 to unemployment, we get better results in terms of your theory. Correlation of .31. Meaning that as taxes go up, so does unemployment. But before we jump for joy on this matter, and while it statistically significant, it doesn't control for other problems, and .31 is mediocre. Lastly, more statistics show that taxes effectively only explain .09% of the unemployment rate. On a more observational basis, unemployment fluctuates for many reasons, and in 1972, the unemployment rate was 5.6% with capital gains at 35%, and Corporate Tax at 48%. Capital Gains, and Corporate Taxes have respectively been 15 and 35%, but unemployment rates went from 5.5% 9.6%. The lowest unemployment rate that we saw was when capital gains were at 20% (with 4% unemployment).

So, while your theory has some legitimacy towards it, it only explains a very small part of why there's outsourcing, why its so prevalent, and why we have such a high unemployment rate.

So, take from this what you will.