Conservative Economic Gospel Is Bunk

[AURex 2,016]

The old Reaganomic fantasy of "trickle down" economics is total, unmitigated bunk. I suspect that even conservatives know it is bunk, but they like pandering to rich donors.

Here is an article summarizing a new research study encompassing 20 OECD countries over a 50 year period that demonstrates what a heaping pile of crap "supply side economics" really is. I've attached a link to the complete report, which is 23 pages.

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Conservative 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" a working paper published [by two British economists], 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..

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."

In their study, the pair of political economists note that "economic performance, as measured by real GDP per capita and the unemployment rate, is not significantly affected by major tax cuts for the rich." However, they add, "major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform" by a magnitude of nearly 1%.

The researchers continue:

Our findings on the effects of growth and unemployment provide evidence against supply-side theories that suggest lower taxes on the rich will induce labour supply responses from high-income individuals (more hours of work, more effort etc.) that boost economic activity. They are, in fact, more in line with recent empirical research showing that income tax holidays and windfall gains do not lead individuals to significantly alter the amount they work.

Our results have important implications for current debates around the economic consequences of taxing the rich, as they provide causal evidence that supports the growing pool of evidence from correlational studies that cutting taxes on the rich increases top income shares, but has little effect on economic performance.

Limberg is hopeful that the research could bolster the case for increasing taxes on the wealthy to fund a just recovery from the coronavirus pandemic and ensuing economic fallout.

"Our results," he said Wednesday, "might be welcome news for governments as they seek to repair the public finances after the Covid-19 crisis, as they imply that they should not be unduly concerned about the economic consequences of higher taxes on the rich."

Here is the complete publication (PDF)

 

 

[DKW 86 7,429]

Good luck selling this. The Rep AND Dems talk a lot but when it comes time to vote, they suddenly remember who their donors are. 

[AuburnNTexas 7,154]

It is not about a question of tax cuts it is a question of paying taxes period.  When large companies show profits in the billions and pay little or no taxes is when we have a problem. The problem is on both sides of the aisle each picks their industries of choice and sign legislation to give them TAX credits (Not Tax Deduction). If a company spends a 100 Million dollars on something it is an operating expense and you get to write it off of your income that is fair it is the cost of doing business but if you give them a tax credit for that 100 Million they get to write it off as an operating expense again fine lowering their total income but as tax credit they get to remove a full 100 Million from their tax bill. If you are given enough tax credits even though you made billions in profit you are legally allowed to basically pay almost nothing on those profits. A simple fix would be a bill limiting Tax credits to 10% of a companies Tax bill. That would bring billions of dollars into the federal government. 

I constantly hear Politicians bemoaning the fact that some companies don't pay their fair share that is something Trump ran on 1st time and Biden this time.  Members of both parties preach the same thing on the campaign trail. They pick a company in an Industry that is friendly to other party as an example of what is wrong. Yet not once I have I seen any member of the House or Senate propose something as simple and easy to implement as a cap on % of Tax credits.

The problem is not the rates we charge it is actually paying taxes at the prescribed rate because of all the loop holes that have been created by both Parties. 

[caleb1633 1,418]

Just want to draw a distinction between "Republican" and "Conservative" when discussing economics. Republicans aren't conservative any more than North Korea is a Democratic People's Republic. Conservative economics would have it that you limit government spending, which definitely doesn't involve giving taxpayer money to corporations. Trickle down economics is about as anti-conservative, anti-liberal, and anti-capitalist as you can get. It's corporate socialism. No economist worth a crap anywhere advocates for such methods.

As far as whether decreasing taxes on the rich stimulates the economy, I don't think you can draw a causal relationship to be able to say it does. It maybe does in theory, but lots of things work in theory that don't work in practice. Just like increasing taxes on the wealthy won't solve any economic issues when the money goes into the hands of a government that hasn't passed a budget on time since 1996 (that would be us). South Africa has one of the most progressive tax systems in the world and has incredibly high income inequality. There's a lot of factors far beyond tax rates on the wealthy that contribute to the trajectory of an economy. It's not as simplistic as most would like to believe. It actually isn't simple at all.

[DKW 86 7,429]

And Truth is about to clash with narrative orthodoxy here. You will of course be vilified for stating the plain, obvious truth, because it runs counter to narratives by the party apparatchiks.