Tax cuts for the wealthy only benefit the rich: debunking trickle-down economics

https://www.lse.ac.uk/research/research-for-the-world/economics/tax-cuts-for-the-wealthy-only-benefit-the-rich-debunking-trickle-down-economics

by safaa1993 • 3 years ago

56 27 3 years ago

lse.ac.uk

Hugsun2• 3 years ago

It's always interesting to be presented with the bubble you are in. I was under the impression that nobody seriously believed in trickle-down economics anymore.

pm90• 3 years ago

I remember these ideas being taught in my elementary economics classes in high school. It seemed mainstream and less fringy then.

asylteltine• 3 years ago

The only people who believed it were rich people and republicans who think if they suck up to rich people enough they will become rich

meinmissoula2• 3 years ago

Your experience matches mine- I only ever heard "trickle down economics" used by people on the left making mocking, derisive commentary about Reagan and neocon politics.

Then someone pointed out to me that my entire affluent, privileged, comfortable life is due to trickle down economics. In the last 15 years, I've had high salaries paid by various money-losing startups, financed by rich people investing in VC funds. Now I'm a millionaire, entirely as a transfer of wealth from the rich. I haven't had a job where my salary was realistically paid by customer money/business revenue since before 2010 or where any of the VCs ever made their investment back.

I don't know if there's any lesson to learn from that or if it's just funny or ironic, but it is kinda entertaining to me to realize the entire Venture Capital backed economy can be seen as trickle-down economics "working".

Hugsun2• 3 years ago

That's hilarious and fascinating. Thanks for the input.

I suppose the issue still stands, as VC based trickle down isn't a very scalable redistribution system.

imtringued2• 3 years ago

This works but only if you believe everyone should live in the Bay area. The equivalent to that is that all Europeans should live in Germany.

Koealaquillage_• 3 years ago

Thanks for the comment, it was also my recent experience. Even though in that case I'd love the trickle-down economics to be renamed Robin Hood economics.

keep_reading• 3 years ago

Trickle down is just another layer of this onion of fraud. The bit of the onion with the syn-Propanethial S-oxide that makes your eyes water? Fiat currency

ender341341• 3 years ago

The problem I run into with family is if you collect it all together and call it trickle-down economics it's "obviously that won't work", but then they turn around and basically just keep repeating all the parts separately anyways. It's similar to the doublespeak I hear from those same people about how unions are a scam that are just out to screw everyone while also, all the people they know who are union retired 10 years before them with big nest eggs and they should have joined the union when they were young.

iambateman• 3 years ago

The problem with debunking trickle-down is that the vast majority of people who still buy it also discredit economic professors and their research.

It’s not a problem of knowledge; it’s a problem of belief.

vivekd• 3 years ago

I don't think people voted for Trump because he promised tax cuts for the rich. I think it was the other stuff like building a wall and appointing anti abortion judges to the Supreme Court.

I hope no one other than a strange fringe minority believes in trickle down. I haven't seen it argued often. I think most people agree that tax schemes favoring the rich are unfair

dave4420• 3 years ago

If only a strange fringe minority believes in trickle down, it’s a strange fringe minority that includes a substantial proportion of the parliamentary Conservative Party, and large numbers of elected Republicans.

elproxy• 3 years ago

Or they did, because the people to benefit from those tax cuts happen to own the media and pushed the very anti-abortion and xenophobic ideas that got him elected...

GoToRO• 3 years ago

Even if it would work, what trickes down are the whims of the rich: I want a yacht, I want a leather bag, I want diamonds on my car and so on. So a lot of people will have unfulfilling jobs. They are esentially slaves (again). This is in contrast to working on future shaping projects, like a bridge, a new type of airplane and so on. When was the last time a billionare wanted a bridge?

jpn2• 3 years ago

https://www.freshyacht.com/blog/The-5-Best-Things-About-A-Ya...

jpn2• 3 years ago

A minimal portion of the net worth of extremely wealthy individuals is spent on luxury items like yachts, bags, and cars. Most of their wealth is typically allocated towards savings or investments, which eventually leads to employment for many of the people in this forum.

imtringued2• 3 years ago

Tax according to the diminishing marginal utility of money and progressive taxation becomes obvious. Don't listen to people who want to undermine it. If the rich want tax cuts and the budget permits it, couple it to tax cuts for everyone.

tbihl2• 3 years ago

I guess I'll ruin the bandwagon.

Everyone here believes in trickle-down economics to the extent that they agree with the statement, 'mass starvation is bad,' or to the degree that they believe in benefits from specialization of labor or the economic vibrancy of cities.

I would expect, in this 'debunking' paper, to find conclusions based on short timelines (certainly less than one generation) and no compelling analysis of taxes paid beyond income and payroll taxes, meaning that the overall taxes paid are not dealt with. It's doubtful that the data explains regional variations.

In reality, upon skimming the paper, the authors make the unstated assumption that income inequality has a static equilibrium. Much like psychology papers, where most conclusions should be appended with, "... for social science undergrad students in Western universities," this one should be given the caveat, "..in rich Western countries that have below-replacement fertility." The longest horizon of analysis is 5 years.

This paper attempts something unachievable, fails, and then proclaims success.

mint22• 3 years ago

Opening statement is going to need significant explanation to not sound like a like half of a strawman or slippery slope fallacy. Not even a complete one.

It’s hard to tell which fallacy it is because it doesn’t attempt to explain why the things are analogous. Even then assuming the analogy is made clearer, it doesn’t explain why it’s relevant to take things to ultimate extremes and judge based those unrealistic extremes.

Everyone here believes in trickle-down economics to the extent that they agree with the statement, 'mass starvation is bad,' or to the degree that they believe in benefits from specialization of labor or the economic vibrancy of cities.

tbihl2• 3 years ago

Opening statement is going to need significant explanation to not sound like a like half of a strawman or slippery slope fallacy. Not even a complete one.

Agreed. To do that, you would replace Tax cuts with Marginal income tax rate cuts, replace only benefit the rich with are correlated in OECD nations with increased income disparities in 1- and 5-year windows, and debunking trickle-down economics with suggesting imprudence of income tax cuts. But it would be a pretty long title to do all that.

comfysocks2• 3 years ago

“Trickle down” economics is an intentionally misleading metaphor. Water trickles down (but not up) because of gravity. Money, on the other hand, circulates. When working class people buy gas at the pump, it benefits the likes of ExxonMobil. When they buy groceries, it benefits the likes of Cargill and ADM. A rising tide on the _demand_ side also raises all boats. Same logic. Trickle down economics makes no more sense than trickle up economics. Each one prioritizes one demographic over the other. I think a more holistic view is what is needed.

Projectiboga• 3 years ago

It has to do with the relative spending velocity of the economic quintiles. The top quintile spends their money much slower and often just move it between their cohort. lower 3 quintiles spend their money quickly, and historically locally. Reagan started the shift away from taxing the most wealthy and the lower and middle classes have stagnated. Yes technology has pushed things worse with income distribution but the tax policies of the GOP administrations have worsened it greatly.

comfysocks2• 3 years ago

I agree.

benreesman• 3 years ago

If anything this has gotten even uglier as cumulative productivity gains have utterly shattered any legitimate scarcity or want.

Scarcity is scarce, we make it so that some people can be better.

“In the sunset of dissolution, everything is illuminated by the aura of nostalgia, even the guillotine.”

tonfreed• 3 years ago

Giving your money to the government doesn't magically help the poor either. With rampant waste and managerial arrogance in the public sector, we should be calling for sweeping reform that spends what tax is there for more efficiently and disincentivises waste and unnecessary spending.

Tax cuts for the wealthy only benefit the rich: debunking trickle-down economics

Related Stories