Indicators · Public finances and policy
Taxes on wages
Normal Direct evidence
6.33% of GDP in Q2 2026, down 0.03 percentage points on a year earlier.
The change over four quarters is lower than 59% of the readings since 1990.
US recessions Periods when this signal was on
What it measures
US federal contributions for social insurance, the taxes on wages, as a share of GDP.
Why it matters
Governments fund social support mostly from taxes on wages. If wages fall as a share of total income, these receipts would fall before any rise in what governments pay to borrow. They also move with changes in tax law.
When it triggers
Triggers when the share falls 0.14 percentage points of GDP or more in a year, a fall larger than 95% of those from 1990 to 2019.
Where it fits
Public finances and government borrowing costs. The argument predicts: Receipts from taxes on wages fall first; then the extra return investors demand to hold government debt rises in countries whose budgets rely on taxes on wages, while growth slows. At the pace measured so far this is years away.
Other possible causes. For taxes on wages, changes in tax law; for borrowing costs, budget politics in one country, or a worldwide rise in bond yields while employment is stable.
The prediction
Open Set 8 Oct 2026
- If we are wrong0.05 points of GDP or above
- Start−0.03 points of GDPQ2 2026
- If we are right−0.14 points of GDP or belowby Q4 2028
If our view is right, the change in federal taxes on wages as a share of GDP over a year reaches −0.14 points of GDP or below by Q4 2028, the threshold at which its rule triggers. The argument expects this fall only some years from now, so the date is the end of 2028, the first of the two dates for which the model's results are given (the other is mid-2032). Reaching it counts as evidence only if no US recession signal was on during the period it measures, or in the three months after, and the prices US businesses charge were not rising faster than in 95% of quarters from 1990 to 2019.
If it is at 0.05 points of GDP or above on two consecutive readings, that counts against our view. That level is the start, −0.03 points of GDP, raised by 0.08 points of GDP, the median size of its change over four quarters (the span its rule measures) from 1990 to 2019. The deadline refers to the period the data cover. If it passes without a reading of −0.14 points of GDP or below, that counts somewhat against our view.
When the rule was set
The rule was set on 8 Oct 2026, when it was not triggered.
How often it has been on
Applied to past data at the end of each month from Jan 1990, using only what had been published by then, it was on in 5% of months to 2019 and 9% since 2020. More than six months from any US recession as dated by the National Bureau of Economic Research, it triggered in Jan 1993, Jan 2010, May 2011 and Jul 2021. The rule was set with these years in view, so these figures cannot show how well it predicts.
Past triggers
On the data published at the time, it triggered in Jan 1993, Jan 2010, May 2011 and Jul 2021.