Economists admit that tax cuts for the rich fail to trickle down

[Stevicus]

50 years of tax cuts for the rich failed to trickle down, economics study says

Tax cuts for the wealthy have long drawn support from conservative lawmakers and economists who argue that such measures will "trickle down" and eventually boost jobs and incomes for everyone else. But a new study from the London School of Economics says 50 years of such tax cuts have only helped one group — the rich.

The new paper, by David Hope of the London School of Economics and Julian Limberg of King's College London, examines 18 developed countries — from Australia to the United States — over a 50-year period from 1965 to 2015. The study compared countries that passed tax cuts in a specific year, such as the U.S. in 1982 when President Ronald Reagan slashed taxes on the wealthy, with those that didn't, and then examined their economic outcomes.

Per capita gross domestic product and unemployment rates were nearly identical after five years in countries that slashed taxes on the rich and in those that didn't, the study found.

Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

 

[Stevicus]

Q: How many conservative economists does it take to change a light bulb?

A1: None. If the government would just leave it alone, it would screw itself in.

A2: None, because, look! It's getting brighter! It's definitely getting brighter!

A3: None, they're all waiting for the unseen hand of the market to correct the lighting disequilibrium.

 

[Revoltingest]

What always confounds me is that the discussion
of taxation is always about who & how much, but
rarely about specific tax policies, eg, marginal vs
average tax rates. Good taxation strategy cannot
be designed based upon such simplistic a view
of more-or-less on rich-or-poor.

 

[Secret Chief]

50 years of tax cuts for the rich failed to trickle down, economics study says



Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

As you possibly imply, the universities have moved towards economics meaning the supposed workings of capitalism. Socialism has been filed under the politics department.

 

[Valjean]

50 years of tax cuts for the rich failed to trickle down, economics study says



Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

Surprise surprise

 

[Kooky]

What always confounds me is that the discussion
of taxation is always about who & how much, but
rarely about specific tax policies, eg, marginal vs
average tax rates. Good taxation strategy cannot
be designed based upon such simplistic a view
of more-or-less on rich-or-poor.

Why not?

 

[Revoltingest]

Why not?

Examples....
If there weren't such large tax subsidies of home
ownership, there'd be less incentive for price bubbles.
Self employment tax is an anti-progressive step
function that creates very high marginal tax rates
for small business, & encourages avoidance & evasion.

 

[exchemist]

50 years of tax cuts for the rich failed to trickle down, economics study says



Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

Ah, but which economists? Economics is not like natural science. There is remarkably little consensus, for something that likes to think of itself as a science. One could almost say, pace Clausewitz, that economics is the continuation of politics by other means.

But anyway, the paper in question seems to be this one:
http://eprints.lse.ac.uk/107919/1/Hope_economic_consequences_of_major_tax_cuts_published.pdf

Most of it is highly technical statistical analysis, but the conclusion is fairly clear: there is no evidence that tax cuts for the rich benefit the rest of the economy, whether in terms of levels of employment, salary or overall economic growth.

As you say, this is something a lot of us have come to suspect, but it that makes it all the more important to do a piece of rigorous work like this, to substantiate the suspicion.

 

[Yerda]

Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

From what I've read I get the impression that trickle down theories were always fairly controversial among economists.

 

[Sunstone]

Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

I'm pretty sure I know what you mean by 'economists' in this context. Something along the lines of those 'opinions for hire' people who you can find in any branch of knowledge today that it is politically useful to someone to confuse people about. They're as often the loudest voices in economics as they are in, say, global climate change, because whatever they say about things is sure to get amplified by the same people who have bought their opinions in the first place.

Unfortunately, those whores contribute to the popular myth that economics is useless when it comes to understanding anything about how things work, or about what can and cannot be done about changing a country's economy to make it work for more people.

Granted, economics is a very flawed means of figuring those things out.

But in some very key ways, it's the best means we have today. Figuring those things out as well as we can is vitally important to almost every human on the planet, whether they know it or not. And -- most important of all -- a whole lot of things about economics are actually already figured out well enough to be useful information -- even today.

If that surprises anyone -- and it's sad that it does surprise some people, given what's at stake here -- try thinking of it this way: It didn't take our ancestors advanced degrees in physics to figure out how to manufacture stone tools. There is a whole lot of economics that can be figured out without knowing enough about the subject to more than marginally understand it.

That tax cuts on the rich do nothing much to improve anyone's lives except the rich was no news to economists 20 years ago. I think it would be naive to think it was news even to the 'opinions for hire' whores.

What you are seeing here is what you see in every science.

Someone or some group of researchers adding more evidence in support of an already well established theory or hypothesis. To so many of us, it's overkill. To science, it's how things are frequently done, and always will be frequently done.

 

[Sunstone]

From what I've read I get the impression that trickle down theories were always fairly controversial among economists.

From day one.

I even had a non-profit business client who within a year or two of Reagan's 1981 tax cut was researching its effects on poor people. At the time, I didn't know much about it, but I was sure simply on the basis of what they had already found that they were idiot left wingers too stupid to see things as they were due to their ideological blinders.

Yeah, I grew up Republican. Still was Republican back then.

Also, I was sure I was a very stable genius back then, too.

 

[Twilight Hue]

The more I think about it , the more it makes sense.

Trickle down works.

But....

As it trickles down. I should have known who takes first crack are the ones first in line holding the silver buckets well upstream. Everyone further along grabs a 'little' here, a 'little' ) there....

It never reaches those holding the dixie cups.

 

[Audie]

50 years of tax cuts for the rich failed to trickle down, economics study says



Not that this is any great surprise to anyone - except economists, apparently. I wonder why it took them 50 years to figure this out.

Meaning economists are right when they say what you think?

I noticed the article says it didn't have any effect
one way or the other...so what is wrong with it?

 

[epronovost]

From what I've read I get the impression that trickle down theories were always fairly controversial among economists.

It never was popular amongst economists, but very popular amongst big businesses and wealthy people and what they lack in concensus, they can make up in influence hence the popularity of such a model even though even it's premise doesn't make much sense.

 

[Audie]

It never was popular amongst economists, but very popular amongst big businesses and wealthy people and what they lack in concensus, they can make up in influence hence the popularity of such a model even though even it's premise doesn't make much sense.

Here's a perspective

"Trickle Down Economics Does Not Exist -- The Benefits of Capitalism Do" Trickle Down Economics Does Not Exist -- The Benefits of Capitalism Do

 

[Sunstone]

I'm going to be blunt even by my own standards for bluntness. If and when you hear a scientist talking about some other science than their own -- or even some other, non-scientific, academic discipline than their own -- be careful before you take their words at face value.

Some of the biggest snobs in human history have been intellectuals of one description or another towards other intellectuals. It's a part of the subculture. "Put down the other field to make your own look like it requires more brains than it does to be in it."

That sort of snobbish behavior feeds right into the dangerous myth that education is worthless in understanding anything better than one's favorite leader understands it.

 

[Audie]

What always confounds me is that the discussion
of taxation is always about who & how much, but
rarely about specific tax policies, eg, marginal vs
average tax rates. Good taxation strategy cannot
be designed based upon such simplistic a view
of more-or-less on rich-or-poor.

How do ya expect to make a catchy
sound bite outta that?

 

[Kooky]

Examples....
If there weren't such large tax subsidies of home
ownership, there'd be less incentive for price bubbles.
Self employment tax is an anti-progressive step
function that creates very high marginal tax rates
for small business, & encourages avoidance & evasion.

Would that be important for people who
don't own a house
+ aren't self employed
+ don't run a small business?

 

[Revoltingest]

How do ya expect to make a catchy
sound bite outta that?

Aye, tis a puzzlement.
It's like when I try to interest people in the intricacies
of tax reform under Trump....they want to complain
about tax reduction, but have no interest in the details,
eg, increasing taxation on the wealthy by reducing
the allowable SALT deduction to $10k.

 

[Revoltingest]

Would that be important for people who
don't own a house
+ aren't self employed
+ don't run a small business?

Yes. Renters should be incensed that home
ownership is directly subsidized, but renting is not.
But those were just a couple examples culled from
the many. Employees should be concerned with
regressive rates of payroll taxes. The poor should
be concerned with loss of benefits upon earning
wages which are reduced by heavy income taxes.