by Patriotic Millionaires | 3.27.18
What is trickle-down economics? Trickle-down is the economic theory at the heart of the GOP tax bill, and the entire GOP perspective on taxes, that tax cuts for businesses and rich people will boost the economy and help all Americans. Basically, it means giving rich individuals and corporations a lot of money and hoping it “trickles down” to help the poor and middle class. In recent years, as the trickle-down theory has become less popular, it’s been rebranded as “supply-side economics.”
Does trickle-down work? It almost goes without saying, but no, funneling massive amounts of money to corporations and the wealthy does not help the poor and middle class. Our country has tried trickle-down before, and it has never led to the explosive growth its supporters predicted. In fact, it has often led to the opposite, as deficits mount and important programs and services are cut. Since 1982, when the first iteration of trickle-down was used to justify tax cuts under Reagan, the wealth owned by the richest people in America has skyrocketed (the combined net worth of the Forbes 400 has multiplied 29 times since), while wages for the rest of the country have stagnated.
We’ve vividly seen the failure of trickle-down in the state of Kansas, where in 2012 Gov. Sam Brownback dramatically cut taxes for corporations and wealthy individuals, calling it a “real live experiment” in supply-side tax policy. The experiment was an abject failure, with services withering, deficits mounting, and growth rates lagging behind neighboring states and the nation as a whole. It got so bad that the Republican-controlled legislature had to eventually override his veto and raise taxes again to restore normal working order.
As this analysis from the Center for American Progress shows, tax cuts for the wealthy don’t lead to job growth. In fact, over the last three decades the economy has grown more after tax increases for the rich than decreases.
How did the GOP tax bill promote trickle-down? The GOP tax bill was a massive handout to wealthy individuals and corporations that does virtually nothing to help the poor and middle class. Normal Americans are not just not getting a tax cut, the majority are actually now getting a tax increase. The bill was intended to trick middle-class Americans into thinking they were better off with short-term tax breaks, but in the long run, as their cuts expire, most Americans will end up paying more, while corporations and wealthy Americans get to keep their tax cuts.
The bill’s skew towards the rich is not just limited to the long-term, however. Even immediately, in 2018, wealthy households stand to gain much more than poor and middle-class ones. The 670,000 households earning more than $1 million per year will benefit, as a whole, more than the 113 million households earning less than $75,000 a year.
Written by Patriotic Millionaires
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