Lefties love to redicule what they call the "trickle down" theory of economics, their term for the "supposed" (in their minds) benefits to the "non-rich" of what they call "tax cuts for the rich." However, supply-side economists have never used the phrase "trickle-down", which implies that the first beneficiaries of tax cuts are the wealthy, and that the non-wealthy's benefits amount to scraps.
However, in the real world of facts, the tax cuts advocated by free marketeers have drastically helped everyone, and in amounts much greater than those whose who limit their sights to calculating tax bills. If these tax cuts result in a Wal-mart worker keeping his job, his benefit amounts to much more than $100 or so in his tax bill savings. And what of the WalMart worker who before the tax cut had no job, but such a job became available due to the tax-cuts economic stimulation?
As Thomas Sowell points out here, whenever these tax cuts occur, "the wealthy" always end up paying more tax dollars. Why? Because although their tax RATE decreases, their income increases, and they pay more due to a lower tax rate charged onto a higher income. This is why these tax cuts always result in greater tax revenues. This concept came to my mind a day or so ago when I read that in south Florida, the increase in property values has resulted in such a bonanza of tax revenue increases that local people want to be "repaid" by a "tax cut", by which they mean a reduction in the property tax rate. But what will happen if the property tax rates decrease? THE VALUE OF THE PROPERTY WILL INCREASE, as prospective buyers learn of this new benefit to living there! It would be fully understandable and predictable if a tax rate cut resulted in residents there actually getting a bigger tax bill due to a bigger boost to their property values.
I hope that Detroit officials take notice, as they continue increasing tax rates on a population of people who constantly flee to the subburbs.
2006-06-02
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2 comments:
"However, supply-side economists have never used the phrase "trickle-down", which implies that the first beneficiaries of tax cuts are the wealthy, and that the non-wealthy's benefits amount to scraps."
According to Wikipedia, you are incorrect, sir.
http://en.wikipedia.org/wiki/Trickle-down_theory#Reagonomics_and_Trickle_Down_Theory
"Trickle Down Economics was coined from a speech made by David Stockman, who was Ronald Reagan's chief economic advisor. He painted supply side economics as part of a long tradition in economics; that laissez-faire will benefit not just those well-placed in the market (the rich) but also the poorest. The general principle is well said in (Bernard de Mandeville, The Grumbling Hive (1733)) "private vices are public virtues". Because the wealthy spend lavishly and employ others, benefitting the rich, benefits the poor.
Trickle down was used to justify a range of changes under both British Prime Minister Margaret Thatcher and President Ronald Reagan, specifically those which attempted to break the power of unions, reduce impediments to hiring and firing, reducing environmental regulation, and pursue a less anti-corporate stance to legislation and economic policy overall.
The term fell out of favor in the late 1980s and early 1990s, even though the economic program of lowering marginal tax rates, selling off government stakes in assets, and reducing regulation, continued as a center piece of the Republican Party platform in the United States."
And yet David Stockman didn't use the term; liberals invented the term in order to disparage what Stockman accurately described. Supply-side economics gives bigger tax breaks to "the rich" because previous policies have increased taxes "progressively" on higher incomes. These tax cuts "for the rich" flatten the tax structure.
A flat tax structure leads to more economic growth, and although "the rich" face a lower tax rate, they pay more taxes due to making more income. "The poor" and "the middle" also make more during these good economic times; they make more in income from these policies than they do from whatever tax breaks they might get. People who say that the average family "only got $500 from the Bush tax cut while Bill Gates saved $50million" misunderstand of the full economic picture. These are the people who use the term "trickle down" economics.
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