If i got given a pound for every time i have heard the words 'Trickle Down Economics' since Friday i would be able to easily benefit from the staggering higher rate tax cuts proposed by the British Government but nobody has although it is one of those things a blagger can throw into a conversation to convince people that they know what they are talking about but i went one better and asked an actual, real life economist what is it, does it work, has it ever worked before and what should they do instead.
First the What is it? In short it is cutting taxes for the rich at the top of the economic pyramid, in the belief that it will enable wealthy owners to create more jobs for middle and lower class citizens, meaning the benefits trickle down through to the bottom of the pyramid therefore benefiting everyone
and the lost tax revenue is regained by the economic boost created by these jobs and the workers now have more money.
Then came the 'Does it Work?' and basically, nope because inequality grows, there is no significant effect on jobs or growth as nothing trickles down at all. I found a 2020 report from the London School of Economics and Political Science who compared the results of countries that passed tax cuts to the richest in society from 1965 to 2015 and found that 'tax cuts for the rich had no significant effect on employment of GDP which were both nearly identical in countries that decreased wealth taxes and those that didn’t significantly reduce the taxes on the rich in both the short and medium term.
A 2015 paper by the International Monetary Fund argues that there is no trickle-down effect as the rich get richer and if anyone knows, it's the IMF.
What about 'Has It Ever Worked?' and again it's a big fat nope as economies don’t require the rich to become even richer, it requires economic growth caused by spending money and the wealthy don’t spend their money. If a billionaire gets another few million in tax reduction, that money goes straight to a bank account and does nothing for the local economy at all. America has tried it a few times under Reagan and Bush who both slashed tax on higher earners but inequality soared and the incomes of the Top 1% of earners tripled and resulted in cripplingly high interest rates and a threefold increase in US Government debt. President Trump gave it a try with his 2017 tax cuts but they failed to stimulate growth and did not lead to sustained business investments and increased the US debt from $19.95
trillion when Trump was sworn in to $27.75 trillion when he left office.
Finally, what should they do instead and he said why give something to A in hope that it would trickle down to B when you can just give it to B to start with and cut out the middleman? The IMF report agrees, stating that to grow the economy, you have to increase the income share of the poor and middle classes.
So it's all a busted flush then and Liz and Kwasi are taking us to financial ruin but let's end with a real life example, Amazon and Jeff Bezos who has more than enough money, courtesy of tax cuts, to pay employees well. Instead, he increases his fortune through continual exploitation, abuse and underpayment of workers. No one benefits except him and the other wealthy executives at the very top of Amazon.
Sunday, 25 September 2022
Trickle Down Economics In A Nutshell
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