I admit it.  I have never understood how so many people keep falling for the “kool-aid”.  (Note:  You may have to be of a certain age to realize that this expression covered those folks who willing drank the “kool-aid” the “Reverend” Jim Jones proffered to his [naïve, unable to critically think] flock- that was actually poison to end their lives.)

The particular flavor of Kool-Aid I will be discussing today dates all the way back to David Stockman and Ronald Reagan.  When they “promised” that massive tax cuts for the rich would benefit those at the bottom rungs of the economic strata.  Because the positive effects would “trickle down” to them.  It became known as “trickle down” economics, because polite society would not employ the proper terminology- bullshit.  (Even Stockman would later publicly recant his original hypothesis of “supply side economics”, a subset of the ‘trickle down’ chicanery.)

And, as recently as 2017, America once again drank the diarrhea.  TheDonald (how can you believe a word that leaves his lips or his fingertips- who proved his disregard for law, order, and truth yesterday!) swore that that treasury-destroying tax cuts (Tax Cut and Jobs Act, TCJA) for the rich would be “rocket fuel” for our economy.  That the benefits would trickle down from the 1% to the bottom 80%.  With massive hiring, better wages, capital investments.  (You know- shiny new toys.  Just not there for most of us.)

What a surprise (as in “hell, no”) that the TCJA emptied our treasury, left long-term economic growth in a tailspin, and did not increase any capital investment by industry.

Since the 1980’s, many a developed nation has initiated those sort of  tax cuts- promising that they would benefit all.  Yet, nary a whit of evidence has ever been provided those pronouncements that all society would benefit (or even most!).  The ruse started with the Reagan tax cuts that disintegrated the (admittedly high) burden, lowering the maximum tax rate from 70% to 28%.

 

Along come David Hope and Julian Limberg, two lecturers (in the States they would be called Professors) from LSE (the London School of Economics) with their treatise to fully debunk this myth.  (Of course, that assumes folks still read researched, professional analyses.)

Their tome, “The Economic Consequences of Major Tax Cuts for the Rich”, seeks out the results over five decades (1965 to 2015, stopping at 2015 so that the economic benefit can be measured over the subsequent five years or so) for some 18 wealthier nations (members of the OECD-Organization for Economic Cooperation and Development).  Hoping to find ONE instance of “trickle down” that isn’t of the dark brown color variety.  Nope. No such luck.

What these tax cuts have done is exacerbate the divide between the haves and the have-nots, to manifest greater inequalities in our societies.

The criteria for their analysis employed were the “top tax rates” on personal income, “capital gains” taxes on stock and asset sales, and the “estate tax” imposed as wealth is inherited.  Why these three taxes?  Because these are the taxes imposed on the top 10%, and rarely appear as issues for those on the bottom rungs of the economic ladder.   The indicators upon which they hoped to find positive effects include economic growth (as in Gross Domestic Product, GDP), unemployment rates (to see if jobs truly are created), and income inequality.   And, by using more than just income tax, the true effect on inequality or the ability to trickle down becomes more evident.

 

In a nutshell, what did they find?  GDP per capita was no different between those that effected tax cuts or those that didn’t.  Unemployment rates were also virtually identical over the long term (but there were short-term changes).  (In other words, any changes were chimerical.)  Except the total income share for the top 1% increased by 0.8% for those countries and instances that initiated tax cuts.

 

As a matter of course, it would make sense to increase the taxes on the rich and corporations right now- to let them pay for the desperate needs of our nation (and of other nations) due to the pandemic.  And, if the increase is less than a 5% margin change, it won’t greatly affect their wealth accumulation, while it  will reverse the losses due to the pandemic-inspired recession.

Here’s one example- the amount of wealth that Jeff Bezos has accumulated during the pandemic (March 2020 to December 2020) could pay an additional $100K to each and every employee at Amazon (many of whom, working in distribution centers, at on the bottom economic rungs)- and leave his wealth at least where it was at the start of the pandemic.

Still drinking that Kool-Aid?