Trickle-down economics doesn’t work

By BRITTNEY YOUNG

The theory behind trickle-down economics is that tax breaks for the wealthy will in turn benefit the middle class because the extra monetary gain “trickles” down.

The idea is that all members of society benefit from this growth, which comes from those with the resources and skills to increase productive output.

In reality, trickle-down economics is politically influenced and has no scientific backing.

The closest thing to trickle-down is supply-side economics, which argues for creating economic growth by investing in capital and lowering barriers on production of goods and services. The theory says tax cuts support economic growth, whether for business or for employees.

The biggest example of trickle-down economics in action came during the Reagan era in the 1980s. Arthur Laffer, known as “the father of supply-side economics,” was the founding member of the Reagan Executive Advisory Committee in 1980.

He’s the creator of the Laffer Curve, a chart that seeks to explain the benefits of lowering taxes to create monetary output.

At zero, the chart shows that no taxes equal no government income. As taxes increase, so does income. When taxes become too high, however, they don’t create any economic growth.

The problem? Laffer neglected to number the curve, so there really is no way to see the actual increase of revenue based on tax rates.

Now, some would say that innovation spurs progress and creates economic growth in the middle class.

The middle class prospered from the late 1800s to the 1920s with new industries emerging such as electricity and telephones. Henry Ford’s Model T assembly line increased productivity 10 times and he doubled his workers’ wages.

Trickle-down economics seems to work in this scenario, right? The major business prospers, and so then do middle-class workers. Unfortunately, modern businesses haven’t shared the wealth.

Tax breaks were prevalent for the top 10 percent in both the Reagan and Bush administrations. All we have to show for it is a tripling of the national debt and a gap increase between wealthy Americans and the middle class.

It’s a reverse Robin Hood ideology where the rich are supposed to use their money to give to the poor. Instead they keep it for themselves like a regular Prince John.

 Brittney Young will graduate from PCC this fall. She hopes to transfer to the University of Arizona to study English and Law.

Filed Under: InsightOpinion

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  1. People who study English and Law should not pretend to understand the complex economics of taxation. There is no such thing as “trickle down economics” – it’s just a political wisecrack.

    Supply-side economics is about incentives, notably the behavioral response to changes in marginal tax rates on additions to income. It has been embraced by nearly allAsian countries except Japan. https://pbs.twimg.com/media/Cu-d0tgUMAADTAI.jpg

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