Fifty Years of Tax Cuts for Rich Didn’t Trickle Down, Study Says

Authored by bloomberg.com and submitted by velcrowranit
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Tax cuts for rich people breed inequality without providing much of a boon to anyone else, according to a study of the advanced world that could add to the case for the wealthy to bear more of the cost of the coronavirus pandemic.

The paper, by David Hope of the London School of Economics and Julian Limberg of King’s College London, found that such measures over the last 50 years only really benefited the individuals who were directly affected, and did little to promote jobs or growth.

“Policy makers shouldn’t worry that raising taxes on the rich to fund the financial costs of the pandemic will harm their economies,” Hope said in an interview.

That will be comforting news to U.K. Chancellor of the Exchequer Rishi Sunak, whose hopes of repairing the country’s virus-battered public finances may rest on his ability to increase taxes, possibly on capital gains -- a levy that might disproportionately impact higher-earning individuals.

U.K. Urged to Levy $350 Billion Wealth Tax to Fund Pandemic

It would also suggest the economy could weather a one-off 5% tax on wealth suggested for Britain last week by the Wealth Tax Commission, which would affect about 8 million residents.

The authors applied an analysis amalgamating a range of levies on income, capital and assets in 18 OECD countries, including the U.S. and U.K., over the past half century.

Their findings published Wednesday counter arguments, often made in the U.S., that policies which appear to disproportionately aid richer individuals eventually feed through to the rest of the economy. The timespan of the paper ends in 2015, but Hope says such an analysis would also apply to President Donald Trump’s tax cut enacted in 2017.

“Our research suggests such policies don’t deliver the sort of trickle-down effects that proponents have claimed,” Hope said.

calitri-san on December 16th, 2020 at 15:40 UTC »

That’s why you cut taxes for everyone.

WriteBrainedJR on December 16th, 2020 at 14:59 UTC »

Tax cuts on the poor will trickle up, though.

tapdancingintomordor on December 16th, 2020 at 14:14 UTC »

It's impossible to take anyone who use "trickle down" serious. It's a political concept, mainly used by people who are critical of it. This article by Justin Wolfers explains better how economists look at tax cuts. One issue here is that the paper seems to look mainly at income taxes and what happens to labor supply directly. But the case for it, as Wolfers note, is just as much what happens to investment.