TAILIEUCHUNG - A YEAR OR MORE: The high CosT of Long-Term UnempLoymenT

Two methods are employed to examine the correlation between the top statutory tax rates and the various measures of economic growth. In both cases, the correlation between two variables is determined; causation, whether changes in one variable cause the other variable to change, is not determined. The top statutory tax rates are marginal tax rates—they indicate the proportion of an additional dollar of income that is paid in federal income tax. Economic theory posits that it is the marginal tax rate, not the average (effective) tax rate, that affects decisions regarding work, saving, and investment. 16 The average tax rate has. | A YEAR OR MORE THE HIGH COST OF LONG-TERM UNEMPLOYMENT PEW Economic Policy Group FISCAL ANALYSIS INITIATIVE PEW CHARITABLE TRUSTS The Pew Charitable Trusts is driven by the power of knowledge to solve today s most challenging problems. Pew applies a rigorous analytical approach to improve public policy inform the public and stimulate civic life. We partner with a diverse range of donors public and private organizations and concerned citizens who share our commitment to fact-based solutions and goal-driven investments to improve society. PEW ECONOMIC POLICY GROUP PEW FISCAL ANALYSIS INITIATIVE The Pew Fiscal Analysis Initiative is a division of the Pew Economic Policy Group which promotes policies and practices that strengthen the . economy. The Fiscal Analysis Initiative seeks to increase fiscal accountability responsibility and transparency by providing independent and unbiased information to policy makers and the public as they consider the major policy issues facing our nation. Together with outside experts from across the political spectrum the Initiative will provide new analysis and more accessible information to inform the debate on these issues. TEAM MEMBERS Ingrid Schroeder Director Pew Fiscal Analysis Initiative Scott S. Greenberger Senior Officer Sarah Nolan Senior Associate Ernest Tedeschi Senior Associate Douglas Walton Associate Evgeni Dobrev Administrative Associate John Morton Managing Director Pew Economic Policy Group Douglas Hamilton Deputy Director Pew Economic Policy Group ACKNOWLEDGEMENTS Scott S. Greenberger and Douglas Walton wrote this report with research assistance from Evgeni Dobrev and background analysis from Sarah Nolan. The report was reviewed by all team members Joanna Breslow Pete Janhunen Samantha Lasky Lucy Nombo Jeremy Ratner and Scott Winship. Design expertise was provided by Do Good Design. This report benefited from the insights and expertise of two external reviewers Gary Burtless of the Brookings Institution and Donald .

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