- 22 Dec 2020 03:25
#15144443
More evidence against the ‘trickle down’ orthodoxy in macroeconomics
From Bill Mitchell's blog of 12/22/2022.
This supports my contention that tax cuts for the rich "do not cause or correlate with economic growth that could make the cuts 'pay for themselves'."
Links to the 2 articles bolded above.
Trickle down economics – the evidence is damning => http://bilbo.economicoutlook.net/blog/?p=29678
The Economic Consequences of Major Tax Cuts for the Rich => http://eprints.lse.ac.uk/107919/1/Hope_ ... lished.pdf
.
From Bill Mitchell's blog of 12/22/2022.
On December 10, 2014, I wrote this blog post – Trickle down economics – the evidence is damning. The discussion was about how inequality undermines growth and that redistribution of national income towards higher income groups does not stimulate income growth for lower income groups. It provided evidence that destroys the basic tenets of mainstream economics and supports a wider social and economic involvement of government in the provision of public services and infrastructure, particularly to low income groups. The ‘trickle down’ fiction was propagated in the late 1970s and early 1980s by the likes of Margaret Thatcher and Ronald Reagan and dovetailed with the emerging dominance of supply-side thinking. Behind ‘trickle-down’ was a nasty neo-liberal plot to undermine state activity and rewind the gains made by the workers under the welfare states and unionism over the course of the C20th. Now a new report from researchers at the London School of Economics – The Economic Consequences of Major Tax Cuts for the Rich – repeats the evidence, and, perhaps because we are further down the road in realising how deficient mainstream macroeconomics is, new evidence of something that we have known since the ideas first came out of the sewers, might push the paradigm shift a little further.
This supports my contention that tax cuts for the rich "do not cause or correlate with economic growth that could make the cuts 'pay for themselves'."
The main results of the [new LSoE] study include:
1. “major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform … The magnitude of the effect is sizeable; on average, each major reform leads to a rise in top 1% share of pre-tax national income of 0.8 percentage points.”
2. “The results also show that economic performance, as measured by real GDP per capita and the unemployment rate, is not significantly affected by major tax cuts for the rich. The estimated effects for these variables are statistically indistinguishable from zero, and this finding holds in both the short and medium run.”
3. “our analysis finds strong evidence that cutting taxes on the rich increases income inequality but has no effect on growth or unemployment.”
4. “tax cuts for the rich are associated with rising top income shares.”
5. “Our findings on the effects of growth and unemployment provide evidence against supply- side theories that suggest lower taxes on the rich will induce labour supply responses from high-income individuals (more hours of work, more effort etc.) that boost economic activity …”
6. “income tax holidays and windfall gains do not lead individuals to significantly alter the amount they work …”
7. “lower taxes on the rich encourage high earners to bargain more forcefully to increase their own compensation, at the direct expense of those lower down the income distribution.”
Links to the 2 articles bolded above.
Trickle down economics – the evidence is damning => http://bilbo.economicoutlook.net/blog/?p=29678
The Economic Consequences of Major Tax Cuts for the Rich => http://eprints.lse.ac.uk/107919/1/Hope_ ... lished.pdf
.