Hear that Trickle? No ? Neither did I.

[tniassaint.livejournal.com]

It is astounding to me that the highest marginal tax rates are at a 65 year low and the "right" still claims they are too high... even funnier when one considers that we are engaged in several military conflicts and running record deficits. Funny how you run up debt when you drop your rates of income.

Oh what's that? The Congressional Research Service is now also reporting in a non-partisan study that the statistics do not support this concept that lower tax rates on the wealthy and businesses spur growth. Oh what? While our tax code is (supposedly) so high, few businesses pay at that rate, and most pay some of the lowest rates ever. Any company paying the higher, full tax rate should fire their accountant.

Trickle Down doesn't work. It never has.

So - your thoughts?

Comments

[pastorlenny.livejournal.com]

The big problem is people thinking they are entitled to food -- especially after Bain invested so heavily in family-owned farms.

[underlankers.livejournal.com]

Anyone who studies basic economics knows trickle-down is a Big Lie. The conservative crowd that merges it with an unholy hybrid of fundamentalist Protestantism and Objectivism is immune to such rational considerations.

[tniassaint.livejournal.com]

"...immune to such rational considerations"

Oh so true - even had me laughing...

[politikitty.livejournal.com]

Ugh. My nitpicking radar is ringing.

The CBO does not find that tax cuts fail to stimulate the economy. They regularly find that tax cuts are not self-financing and because the multiplier is not particularly high. Fiscal policy has quite a lag and minimal effects on both the supply and demand side.

Likewise, increased globalization both mutes the trickle down process and increases the costs of corporate taxation.

You give some extra money to the fat cats, and it's not clear they'll invest in America. The rate of return is higher in China, and investing there promises that more Chinese citizens have a shot at becoming middle class. It's unfortunate for Americans, but the increase in Chinese well-being will increase demand. Hopefully for some American goods. It's not a very satisfying answer when our economy is flagging. But economic planning at a country isn't particularly feasible. The government is somewhat limited in their supporting role. (The libertarian approach would be get out of the way, while I would propose more human capital investment and safety nets. But either approach is limited in their effect on the economy.)

Similarly, increased commerce is making corporate taxation bad policy. In the infancy of the US, we paid for everything with tariffs. Government was small. A narrow tax base was fine. And if you wanted cotton, you didn't have many options but to go down South. As more options become available, and it's harder to monitor business activity, businesses were less willing to pay these tariffs. And the amount of revenue was not enough to sustain our size of government. As corporations can be flexible in where they base operations, that competition will drive down their willingness to pay corporate income taxes.

And remember when people talk about the corporate income tax, they're usually limiting it to the Federal level. The tax burden at the state level is *much* higher, and that is what pushes the US into the non-competitive zone as far as compliance costs. No company is simply in the U.S. By definition, they also have to be subject to state and local jurisdictions.

[badlydrawnjeff.livejournal.com]

"Trickle down" is just as much about economics as it is about fairness. The ability of it to fuel growth is certainly overstated by proponents, but it logically makes sense - less money into government equals more available for investment.

The question is whether it's fair to tax the wealthy more simply because they can supposedly afford it. Many of us rightfully reject that.

[ytterbius.livejournal.com]

Yes it is fair.

[badlydrawnjeff.livejournal.com]

And I disagree.

[tniassaint.livejournal.com]

Those that benefit more from government economic protections, military protections, law enforcement protections, infrastructure investment etc should pay more.

I don't think ANYONE should pay NO tax (and in fact no one in the US pays none); but I can assure you that 27% (my actual income tax rate the last 3 years) will have a substantially larger impact on my life style than 15% will have on the top 1%. In fact, that same 15% would also have a much more significant impact on my net than 40% would have on someone like Romney. Businesses get FAR more direct assistance than people in my tax bracket - and they should pay it. If businesses were not dodging their tax load the way they are individuals would get a more fair break... oh wait... Corporations ARE people... right...

Romney got MORE breaks in taxes (I call that subsidy) on the tax returns he disclosed than I earn. That is not welfare for the rich? He pays a LOWER rate than I do and gets MORE stimulus. Make sense of that for me.

[badlydrawnjeff.livejournal.com]

Those that benefit more from government economic protections, military protections, law enforcement protections, infrastructure investment etc should pay more.

So the poor should pay more?

[underlankers.livejournal.com]

No it doesn't make sense. Less money in government does not mean more investment in anything, least of all society. A good businessman is a sociopath focused solely on his own advancement and to Hell with everything else. An incompetent businessman invests in anything not guaranteed to turn a profit.

[kylinrouge.livejournal.com]

It means more investment in the Caymen Islands.

[politikitty.livejournal.com]

And your argument against the law of diminishing returns?

[badlydrawnjeff.livejournal.com]

No argument against it, really, as it clearly exists, but when you're putting the starting point behind everyone else in the industrialized world, that doesn't need to be a concern yet.

[chron-job.livejournal.com]

"Trickle down" is a political stratagem to excuse a decreased tax burden for the wealthy, by claiming a resultant collateral good that outweighs the cost.

If it is your point that such a decreased tax burden is what is fair and right, irrespective of cost or collateral good, fine. Argue on those merits. Not by selling the snake oil of a fictional collateral good.

[ja-va.livejournal.com]

less money into government equals more available for investment.

Good thing in capital poor countries that are not in equilibrium yet, but does nothing for the US.
Less money into government will result in more money saved or taken out of the country. While the government spends 100%, private earners spend only a fraction, and the more wealthy they are - the less they spend. Therefore if you take 1 dollar of government spending and give it to people, you will be lucky to get 60 cents in investments, and, consequently, will decrease the positive effect on GDP by 40%

[badlydrawnjeff.livejournal.com]

Theoretically.

[fizzyland.livejournal.com]

And do you also reject the notion that the tax code needs reform so that the ultra-wealthy don't pay lower percentages than the rest of us?

[chron-job.livejournal.com]

"Trickle down" The very phrase should have warned anyone what was going on internally.

The usage partakes of the metaphor of water moving over terrain. Water goes from high, to low, nourishing as it passes, and then accumulates to await recycling.

But where does money go? Where does it accumulate? It accumulates with the wealthy. That's our modern definition of the wealthy, right? Having lots of money.

So, giving extra tax breaks to the Wealthy in hopes that it will increase nourishing money moving through the economic landscape, is like running an irrigation pipe into the local lake or ocean, and hoping it will water your crops. There are systemic REASONS for the existence of the lake. The terrain is such that It's part of its nature to retain water. There are systemic REASONS that certain people and institutions are wealthy.

So, why do they define the Wealthy as the "high" from which we expect "trickle down"? If we want to keep to our metaphor, the wealthy would be the low. Consequently, the poor would be the high (and dry), and sprinkling water on them, to eventually accumulate in the lakes and oceans makes some sense. But the poor as high, and rich as low, does not resonate as a metaphor. The reverse, does. Why?

Because the metaphor is based on a confusion of physical terrain with status placement. We have drawn from a water metaphor where high and low are defined by gravity, yet moved to a social metaphor where high and low are defined by a human appraisals of status. Since status does not operate by the physical laws of gravity, there is no reason to presume that a metaphor like trickle-down has any predictive or explanatory power. Also, since the usage includes appeals to status imagery, we are given a substantive clue into what human mental processes are at work when the metaphor is deployed, and believed uncritically.

[ytterbius.livejournal.com]

Like.

[tniassaint.livejournal.com]

Nice metaphor, but it conflicts with the common knowledge of the term - no matter how flawed.

[ja-va.livejournal.com]

There were several studies conducted by the economists on the relation between tax rate and budget. Optimal maximum tax rates for different countries are found to be different, but more or less fall within 50-70% of income. Reducing maximum tax rate below this level does not add any more money to the budget, it actually takes it away. I am sure Republicans are well aware of it, but this position will not buy too many votes among their base, so they keep on bullshitting everybody about how "cutting taxes will help the budget deficit!"

The reason for this is simple - at some point income effect becomes greater than substitution effect, and the value of time becomes greater than the value of extra dollars one can earn by spending this hour working. I.e. if you are on minimum wage and someone gives you couple of hours overtime, you will take them. If you are making 500 dollars an hour, you will likely say "ok, I have money, I need time, so I will rather not work extra 2 hours, I will go and have fun spending the money I already have"

Same thing here - if your tax rate goes from 90% to 80% or from 80% to 70% it encourages you to work more, and the effect of your working more is greater than the effect from lost revenue. However, if it goes from 40% to 30%, it will also encourage you to work more, but not that much more, and the effect on the revenue will be negative - the loss of taxes per individual will not be compensated by the increase of the income due to more work being done.

So, while raising taxes may, indeed, be bad for the economy, cutting them is bad for the budget.

The real dilemma is this - what do we see as the priority now, improving the economy, or balancing the budget? We can not have both.
If republicans are serious about getting the country out of recession, they should forget the budget, they should talk about LOWER TAXES AND INCREASED GOVERNMENT SPENDING.
If they want to fix the budget, then forget the economy - you have to increase the taxes and cut the government spending.
Trying to do both (lower taxes and less spending) will result in greater recession, which by itself will kill the budget.

[kayjayuu.livejournal.com]

I'm curious if TP has had any discussions of the Fair Tax. I'd like to see how that panned (or pans) out.

[kylinrouge.livejournal.com]

It has been addressed before. The gist is that it's actually not very fair at all, and this is coming from someone who was interested in it until I actually did the research on it.

[rimpala.livejournal.com]

How can fiat money "trickle down" anyways, it doesn't have mass.

[ddstory.livejournal.com]

Quantum fluctuation. It's both here and not here.