In Economic circles, trickle down economics is a punchline.
And yet it's still a significant economic platform of a lot of conservative policy makers in the western world. The more it's gets debunked the better.
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A bit of a silly study IMO. Trickle down economics, like any economic system doesn't work unregulated and without strict controls. Randomly assigning policies to trickle down economics and then stating that there's no merit to the philosophy is ridiculous.
It's well established that if an economy is running well, including industry, most people are better off.
The ridiculous system we have right now of tax sheltered personal corporations and ultra low interest rates, has nothing to do with the principles behind trickle down economics. It's two separate issues.
This is like me stating that we shouldn't have publicly funded health care because Stalinist communism was a failure.
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A bit of a silly study IMO. Trickle down economics, like any economic system doesn't work unregulated and without strict controls. Randomly assigning policies to trickle down economics and then stating that there's no merit to the philosophy is ridiculous.
It's well established that if an economy is running well, including industry, most people are better off.
The ridiculous system we have right now of tax sheltered personal corporations and ultra low interest rates, has nothing to do with the principles behind trickle down economics. It's two separate issues.
This is like me stating that we shouldn't have publicly funded health care because Stalinist communism was a failure.
Yes I did. I don't see how you can just equate "major tax cuts" with all trickled down economics. There's a lot more to the concept that just tax cuts.
Even the study itself doesn't relate to trickle down economics. All it says is that certain types of tax cuts for the rich don't necessarily produce positive observable changes in equality. That's assuming you accept their methodology.
I'd argue their is a fundamental flaw in their methodology. They have not accounted for the system of tax sheltering I'd discussed. They've just looked at pure tax cuts, with any accounting for the nature of these tax cuts.
Trickle down economics only works when the money goes back into the system. The concept of trickled down economics isn't about just giving tax cuts to the rich. It's about directed tax policy to encourage economic growth. So tax cuts can be either directed at solving or exacerbating problems of wealth inequality. The current system of personal corporations and low interest rates is, in my opinion, the major driving factor towards this inequality. This study seems to focus purely on marginal tax rates and not how they are applied.
Once again, I'd state this study has as much in common with "trickle down economics" as stating that we should stop funding health care because communism doesn't work.
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Yes I did. I don't see how you can just equate "major tax cuts" with all trickled down economics. There's a lot more to the concept that just tax cuts.
Even the study itself doesn't relate to trickle down economics. All it says is that certain types of tax cuts for the rich don't necessarily produce positive observable changes in equality. That's assuming you accept their methodology.
I'd argue their is a fundamental flaw in their methodology. They have not accounted for the system of tax sheltering I'd discussed. They've just looked at pure tax cuts, with any accounting for the nature of these tax cuts.
Trickle down economics only works when the money goes back into the system. The concept of trickled down economics isn't about just giving tax cuts to the rich. It's about directed tax policy to encourage economic growth. So tax cuts can be either directed at solving or exacerbating problems of wealth inequality. The current system of personal corporations and low interest rates is, in my opinion, the major driving factor towards this inequality. This study seems to focus purely on marginal tax rates and not how they are applied.
Once again, I'd state this study has as much in common with "trickle down economics" as stating that we should stop funding health care because communism doesn't work.
I agree. I skimmed through it as well and thought the same. It all seems very flawed for the conclusions I see some media making. Reducing the higher level tax brackets probably led to rich people declaring more personal income. and thus making it look like the rich are making more money. If that's the way they are measuring income of the rich, then that's a pretty huge flaw.
Plus all the things you said. There's so much more to how the rich are taxed than what the marginal tax rates for personal income are.
Yes I did. I don't see how you can just equate "major tax cuts" with all trickled down economics. There's a lot more to the concept that just tax cuts.
This seems like a response to Mathgod though, not the study. As did your first post, which is why I questioned whether you read the actual study.
Quote:
Originally Posted by blankall
Even the study itself doesn't relate to trickle down economics. All it says is that certain types of tax cuts for the rich don't necessarily produce positive observable changes in equality. That's assuming you accept their methodology.
Not quite:
Quote:
Overall, our analysis finds strong evidence that cutting taxes on the rich increases income
inequality but has no effect on growth or unemployment.
Quote:
Originally Posted by blankall
I'd argue their is a fundamental flaw in their methodology. They have not accounted for the system of tax sheltering I'd discussed. They've just looked at pure tax cuts, with any accounting for the nature of these tax cuts.
Also not quite, they do account for it:
Quote:
using a measure of top 1% share of pre-tax national income that includes both labour and capital income makes it less likely that tax shifting and avoidance are driving the results.
What do you mean by "the nature of these cuts"?:
Quote:
Whilst some authors look at taxes on personal income (Egger et al., 2019; Rubolino and Waldenström, 2020), others focus on corporate taxation (Devereux et al., 2002) or inheritance taxation (Piketty and Saez, 2013b). Second, economists have used different tax policy indicators. Some look at top marginal income tax rates (Piketty et al., 2014), while others look at effective tax rates (Egger et al., 2019) or revenue generation (Baunsgaard and Keen, 2010). We propose an encompassing approach that utilises Bayesian latent variable analysis on a range of different taxes and indicators to overcome these problems.
Quote:
Originally Posted by blankall
Once again, I'd state this study has as much in common with "trickle down economics" as stating that we should stop funding health care because communism doesn't work.
This is a nonsense comparison though. And if you're saying it's silly to take this study and use it as evidence that trickle-down economics doesn't work, then sure, but if you're calling the study silly, you have to give some sort of reason why beyond "I don't like the conclusion someone else drew from it."
The Laffer curve is fundamentally flawed, still that in itself, does not prove that prohibitive tax rates are good for the economy. I think he was correct in saying that a 100% tax yields 0 revenue. It was actually tried by Stalin in the Ukraine in 1932 and eventually resulted in millions of deaths and no revenue.
Of course, Laffer does not account for slavery. That would still not be 100% taxation because you would have to somehow keep them alive with food and shelter. Nor is it a desirable outcome for a society.
Last edited by Flamenspiel; 12-22-2020 at 12:47 PM.
The Laffer curve is fundamentally flawed, still that in itself, does not prove that prohibitive tax rates are good for the economy. I think he was correct in saying that a 100% tax yields 0 revenue. It was actually tried by Stalin in the Ukraine in 1932 and eventually resulted in millions of deaths and no revenue.
Hopefully this will put an end to the chorus of voices these days calling for a 100% tax rate...
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I'll try and read it later when there is more time, but the fact of the matter is that 'Trickle Down Economics' has some merit in concept but is fundamentally flawed in practical application.
The thing about Economics and one of the most misunderstood concepts is that you cant change one variable to achieve a desired result and expect all other variables to remain the same.
As such, its simply one tool available in the right circumstances, but it has to be followed up with various other economic tools and legislations in conjunction in order to ensure the proper application. It also surmises that the Government wants to shift economic responsibilities on to the Private Sector and simply assumes that the Private Sector is actually going to accept those responsibilities.
Further, one of the principle variables you have to account for is 'people' and their actions and as I think we can all attest, the actions of people typically defy accurate prediction.
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I'll try and read it later when there is more time, but the fact of the matter is that 'Trickle Down Economics' has some merit in concept but is fundamentally flawed in practical application.
The thing about Economics and one of the most misunderstood concepts is that you cant change one variable to achieve a desired result and expect all other variables to remain the same.
As such, its simply one tool available in the right circumstances, but it has to be followed up with various other economic tools and legislations in conjunction in order to ensure the proper application. It also surmises that the Government wants to shift economic responsibilities on to the Private Sector and simply assumes that the Private Sector is actually going to accept those responsibilities.
Further, one of the principle variables you have to account for is 'people' and their actions and as I think we can all attest, the actions of people typically defy accurate prediction.
The concept that we should always cut taxes at the top or the bottom is absurd to begin with. There are situations where society, as a whole, is better off with lowering or raising taxes at the top. To say that lowering taxes at the top never helps is ridiculous. That's like saying you should always put on a warmer coat, and keep putting them on.
Yes I did. I don't see how you can just equate "major tax cuts" with all trickled down economics. There's a lot more to the concept that just tax cuts.
Trickle-down economics generally refers to the practice of cutting taxes on the wealthy, in hopes that doing so may result in increased economic activity and a trickle-down effect which benefits all. Time and time again it has been shown that this kind of blanket approach generally leads to massively increased government deficits, exacerbated wealth inequality, and much less economic stimulation than expected.
Perhaps you accept a broader, much more general meaning to the term "trickle down economics", in which case there was no intent on my part to create confusion, and I'm sorry if I did.
Can carefully targeted tax cuts sometimes, in some situations, lead to a net benefit to society? Of course they can. But as others have mentioned, they have to be done smartly and with careful situational consideration.
Trickle-down economics generally refers to the practice of cutting taxes on the wealthy, in hopes that doing so may result in increased economic activity and a trickle-down effect which benefits all. Time and time again it has been shown that this kind of blanket approach generally leads to massively increased government deficits, exacerbated wealth inequality, and much less economic stimulation than expected.
Perhaps you accept a broader, much more general meaning to the term "trickle down economics", in which case there was no intent on my part to create confusion, and I'm sorry if I did.
Can carefully targeted tax cuts sometimes, in some situations, lead to a net benefit to society? Of course they can. But as others have mentioned, they have to be done smartly and with careful situational consideration.
There are situations where trickle down economics works.
There are other situations where it doesn't. My point is that the current state of affairs is not caused by the failures of trickle down economics. It is caused by an ever decreasing tax base for the wealthy, and not an issue changing tax rates.
Specifically, what we've done is allowed the concept of a corporation to be abused, so that the wealthy can hide funds in these corporations, which was not their intended use. Increasing marginal tax rates only makes it tougher for middle class workers to get ahead or start their own businesses.
Then you combine the corporate issue with ultra low interest rates that allow the wealthy to take ELOCs on existing assets and "re-invest" those funds, and we end up with today's mess.
In other words, I find this study to be a vast oversimplification of a far more complex, yet blatantly obvious, issue. The statement that we should avoid trickle down economics is downright dangerous, and the study doesn't even say that. In fact, the study doesn't use the term a single time.
New Study Highlights Failures of Trickle-Down Economics
