Economic Policy Institute Produces Dual Axis Chart That Proves Nothing Affects Economic Growth

The progressive Economic Policy Institute likes the corporate income tax because EPI likes tax revenue in general and feels that the corporate income tax raises it in a distributionally progressive way. They also offer the chart above to prove that corporate income tax rates don’t drive economic growth.

And indeed they don’t. But though this is an unusually egregious example, it highlights a big flaw in the entire chart-blogging genre. By these standards nothing that you can track on that second y-axis affects economic growth. And of course that’s correct. Year-to-year fluctuations in GDP growth are driven by the Federal Reserve, external shocks to commodity prices, and changes in the budget deficit. But it would obviously be a big mistake to conclude that nothing else Congress does matters at all. It just doesn’t matter to year-to-year fluctuations in GDP growth.

(For the record, I think tax policy in a rich country is much more likely to affect the level of economic output than the sustainable growth rate of output but I cannot prove that with a chart)