Study of 50 Years of Tax Cuts For Rich Confirms 'Trickle Down' Theory Is an Absolute Sham

[Trausti]

The problem seems to be one of causation versus correlation. Trausti may be right that taxation won’t cause prosperity, but that’s not the thesis here. The Republicans have pushed the idea that tax cuts on the rich would actually cause prosperity, as the selling point to the average person, but it seems this paper is saying it doesn’t.

Well, yeah. But the OP draws a link between taxation and income inequality - that the tax cuts increased income inequality. I just view that as misdirection from actual causes of income equality - like immigration, regulation, and offshoring. If high taxation resulted in raising those at the bottom, this model would be exportable. But it's not.

 

[ZiprHead]

Modernization and Convergence, 1870-1914

During this period Danish economic growth outperformed that of most other European countries. A convergence in real wages towards the richest countries, Britain and the U.S., as shown by O’Rourke and Williamsson (1999), can only in part be explained by open economy forces. Denmark became a net importer of foreign capital from the 1890s and foreign debt was well above 40 percent of GDP on the eve of WWI. Overseas emigration reduced the potential workforce but as mortality declined population growth stayed around one percent per annum. The increase in foreign trade was substantial, as in many other economies during the heyday of the gold standard. Thus the export share of Danish agriculture surged to a 60 percent.

https://eh.net/encyclopedia/an-economic-history-of-denmark/

Explain how this relates to the prosperity of Denmark today, if you can.

 

[Alcoholic Actuary]

The problem seems to be one of causation versus correlation. Trausti may be right that taxation won’t cause prosperity, but that’s not the thesis here. The Republicans have pushed the idea that tax cuts on the rich would actually cause prosperity, as the selling point to the average person, but it seems this paper is saying it doesn’t.

Well, yeah. But the OP draws a link between taxation and income inequality - that the tax cuts increased income inequality. I just view that as misdirection from actual causes of income equality - like immigration, regulation, and offshoring. If high taxation resulted in raising those at the bottom, this model would be exportable. But it's not.

That's weird because the typical reason given by the right for things like immigration, regulation, and offshoring is that taxes are too high. Are you now saying that lowering taxes didn't prevent that? If so, qed.

aa

 

[laughing dog]

What’s the economic case for making taxes high? Is there an example of a country that taxed itself to prosperity? And are we saying that the mass offshoring of jobs in the 80s had no affect on income equality?

None of your questions directly relate to the OP. None.

Unless you have a link to someone claiming a country can tax itself to prosperity, your question is truly a very stupid straw man.

.

Dude, the OP states that tax cuts lead to income income equality; ignoring any other cause.

Did you actually read the empirical study? The measure of income inequality is the share of national income of the top 1%. What omitted factors do you think would affect that measure?

If we are agreed that high taxation does not create prosperity, then the OP is disingenuous.

That is a non-sequitur. Prosperity and the degree of income inequality are not the same concepts.

 

[Loren Pechtel]

Of course there is a trickle-down effect. The important thing is the size of it--and the Republicans horrendously over-state it. The economic benefit never is as great as the additional tax burden it causes to the rest of the people.

 

[SimpleDon]

"Major tax cuts for the rich since the 1980s have increased income inequality, with all the problems that brings, without any offsetting gains in economic performance."

Neoliberal gospel says that cutting taxes on the wealthy will eventually benefit everyone by boosting economic growth and reducing unemployment, but a new analysis of fiscal policies in 18 countries over the last 50 years reveals that progressive critics of "trickle down" theory have been right all along: supply-side economics fuels inequality, and the real beneficiaries of the right-wing approach to taxation are the super-rich.

The Economic Consequences of Major Tax Cuts for the Rich (pdf), a working paper published this month by the International Inequalities Institute at the London School of Economics and written by LSE's David Hope and Julian Limberg of King's College London, examines data from nearly 20 OECD countries, including the U.K. and the U.S., and finds that the past five decades have been characterized by "falling taxes on the rich in the advanced economies," with "major tax cuts... particularly clustered in the late 1980s."

But, according to Hope and Limberg, the vast majority of the populations in those countries have little to show for it, as the benefits of slashing taxes on the wealthy are concentrated among a handful of super-rich individuals—not widely shared across society in the form of improved job creation or prosperity, as "trickle down" theorists alleged would happen.

"Our research shows that the economic case for keeping taxes on the rich low is weak," Hope said Wednesday. "Major tax cuts for the rich since the 1980s have increased income inequality, with all the problems that brings, without any offsetting gains in economic performance."

I saw this on the LSE website and came here to post it, but in a "no shit Sherlock" kind of way. I applaud your constraint.

 

[SimpleDon]

What’s the economic case for making taxes high? Is there an example of a country that taxed itself to prosperity? And are we saying that the mass offshoring of jobs in the 80s had no affect on income equality?

Capitalism over rewards capital. Capital in the modern economy is nothing but money. Money to build factories and to buy production machinery.

Money is not a scarce resource, it is created by making bank loans and by deficit spending by the federal government. There is no reason to over reward capital. The magic of the markets tells us this. Interest rates are the cost of money and they are functionally at zero right now, considering the rate of inflation.

Taxation is required to control inflation and to redistribute the money that would over reward capital otherwise. By lowering the taxes that the rich pay at the same time that we are suppressing the wages of the not-rich in order to increase profits and the incomes of the rich has produced the economy that we have today. One characterized by the following,

• high-income inequality favoring the rich
• low inflation in the general economy because wages are low, but,
• high inflation in the stock market and the real estate market where the rich save their money,
• where inflation is called "capital gains" and is taxed at a lower rate because,
• this is the only place that we consider inflation to be desirable, which is bizarre,
• and because they save the excess profits created by suppressing wages,
• the excess profits don't go into the general economy where they would create inflation, proving,
• that this study is correct, that increasing the incomes of the already rich doesn't impact the general economy,
• except to increase the cost of real estate and therefore the housing costs for all of us,
• which along with lowering the support for higher education
• in order to further lower the taxes for the rich,
• creates much higher private debt

Which pretty much explains the economy that we have today.

We would be better off if we raised taxes on the rich and we raised the wages of the not-rich. Inflation would be our only problem if the demand created by the higher wages exceeded the capacity of the economy to produce. And as we have seen time and time again the strength of our capitalistic economy is in its ability to adapt to change.

 

[zorq]

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

 

[DBT]

A situation where the top 1% are wealthier than the rest of the population appears to be indefensible, yet it is being defended by those who are not in that privileged position.


That is quite puzzling.

 

[ideologyhunter]

America is a place where politicians can be won at auction. The ultra-affluent have more power now than they did 100 years ago.
Is it sustainable? I think we're finding out how absurd it is to think that we can be a low-tax super power. The phrase makes no sense.

 

[Loren Pechtel]

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

Who built one of the most important recent companies: SpaceX?

Would that have ever happened without the uber-rich?

 

[Loren Pechtel]

America is a place where politicians can be won at auction. The ultra-affluent have more power now than they did 100 years ago.
Is it sustainable? I think we're finding out how absurd it is to think that we can be a low-tax super power. The phrase makes no sense.

The power is more obvious but I do not think it's greater.

 

[zorq]

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

Who built one of the most important recent companies: SpaceX?

Would that have ever happened without the uber-rich?

Who built SpaceX but did it 50 years before Musk? The US government.

Edit: Just because a billionaire HAS done something does not imply that ONLY a billionare could do that thing.

 

[DBT]

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

Who built one of the most important recent companies: SpaceX?

Would that have ever happened without the uber-rich?

Cough...Manned Moon landing '69.

 

[Loren Pechtel]

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

Who built one of the most important recent companies: SpaceX?

Would that have ever happened without the uber-rich?

Who built SpaceX but did it 50 years before Musk? The US government.

Edit: Just because a billionaire HAS done something does not imply that ONLY a billionare could do that thing.

Why would I prefer living in a country with more billionares? Billionaires aren't important for accomplishing any task or goal. Billionaires and multi-millionaires are a bigger drain on the economy than the working class or middle class. Why do so many people in the 99% defend an economy tilted toward the 1%?

Who built one of the most important recent companies: SpaceX?

Would that have ever happened without the uber-rich?

Cough...Manned Moon landing '69.

1) NASA hasn't put anything in space in a long time now.

2) The really important thing about SpaceX is the reusability.

 

[DBT]

1) NASA hasn't put anything in space in a long time now.

2) The really important thing about SpaceX is the reusability.

Which is just a matter of will to act, not ability or means...which your comment suggested.

 

[Lumpenproletariat]

"Major tax cuts for the rich since the 1980s have increased income inequality, with all the problems that brings, without any offsetting gains in economic performance."

Neoliberal gospel says that cutting taxes on the wealthy will eventually benefit everyone by boosting economic growth and reducing unemployment, but a . . .

There is no "Neoliberal gospel" which says this.

 

[bigfield]

1) NASA hasn't put anything in space in a long time now.

2) The really important thing about SpaceX is the reusability.

1) Why do you think NASA hasn't put anything in space in a long time now? It's not as if the US government can't afford to do it - after all, they have far more money to spend than SpaceX does.

2) Why do you think SpaceX was able to invent reusable rockets before NASA? What does SpaceX have going for them that NASA doesn't?

 

[ZiprHead]

"Major tax cuts for the rich since the 1980s have increased income inequality, with all the problems that brings, without any offsetting gains in economic performance."

Neoliberal gospel says that cutting taxes on the wealthy will eventually benefit everyone by boosting economic growth and reducing unemployment, but a . . .

There is no "Neoliberal gospel" which says this.

Riiiiight...

 

[Loren Pechtel]

1) NASA hasn't put anything in space in a long time now.

2) The really important thing about SpaceX is the reusability.

Which is just a matter of will to act, not ability or means...which your comment suggested.

NASA is horribly hamstrung by Washington, it's rocket programs are basically just pork.