In the US, personal taxes are the biggest source of government revenue. They make up 70% of current tax receipts vs. 21% from corporate taxes. Since the start of recession and job losses in early 2008, personal tax receipts have dropped by 32%, or by 3% of GDP. In other words, the drop in employment is responsible for nearly half of the widening in fiscal deficit over the past 2 years.
Click on charts to enlarge, courtesy of Societe Generale.
Would bond vigilantes appreciate improvements in employment?