Trickle down makes no sense at all.
Give corporation X more money and they are going to decrease prices, hire more people and it will be passed on to others?
Make more widgets.
Huh? Why would they do that when others don’t have more money to buy your product.
I guess it might be beneficial to the yacht industry, but that’s about it.
After I get up, I usually need to trickle down, and if there were any boats then they would all float a little higher.
I think a lot of people believe entrepreneurs waste less money than government. This is an optimistic view, sometimes true, because they have wildly different priorities and obligations, are selective of their samples, forget about advantages received, have different disclosure requirements and replace luck with influence in the equation when possible. Government should allow businesses to business and better resist the temptation to pick winners and losers.
You Dopers have already expressed my eternal frustration with the argument that we should lower taxes on”job creators”, instead of the bottom of the work force, to stimulate the economy.
If a company suddenly makes more money from year one to year two (because they got a big tax cut), but there is no change in either the number of customers or the size of the orders, there is no reason to hire more workers or expand the company: you’re meeting demand. If you’re putting money into the company at that point, it’s because you’re trying to drum up more business - increase demand.
The only logical reason for a business to decide it needs to hire more workers, or expand its operations, is if it either increases its number of customers or the size of its orders. Increase demand.
And how does that happen? By putting more money in the hands of the consumers (which is to say, the hourly and salaried people who make up the majority of society - and for whom spending is more immediate and more local the poorer they are). This increases demand.
Supply side economics has been tried. It does not work. The wealthy may spend their extra money, but it may just as likely end up overseas as in our economy. Or it’s for singular purchases. Or hoarded.
I wish somebody would promote a demand side tax policy instead.
Another reason to be skeptical of this cutting taxes for the rich business is looking at the Bush-era tax cuts and the Trump-era tax cuts - you woulda thought the tax cuts would have resulted in a massive employment boom (trickling down) - did that occur?
Exactly. Injecting money into the economy at the level of the consumers instead of the producers means they will consume, and the money will end up with the producers anyways; they’ll just have to actually, you know, earn it.
Or you’re ready to write the big check for lots of automation (or move huge segments of your business offshore) and finally put an end to all of those whiny, insufferable … workers.
I’ve heard that claim; don’t know how often it really happens, but it’s despicable if it does. We ask people (and not usually the well-to-do) to make sacrifices for the good of the country. Some join the military and even wind up giving their lives. If some rich asshole can’t give up some money for the country, if he’d sell out his citizenship to get a lower tax rate somewhere else, who needs him? Don’t let the door hit you in the ass on the way out!
The threat is probably more common than the realization, but passports to many countries can and are easily purchased by those willing to invest significant amounts.
My impression, perhaps wrong, is that in some cases with enough legal knowledge it is not necessary to move to realize tax savings.
A lot of businesses also absolutely support local development.
I was remembering the case of Ippy Dorrance, heir to the Campbell’s Soup fortune. I found a (quite slanted) article from 1994 that talked about these stateless, soulless, American economic expat’s:
The article mentions 306 “my country: love it or leave it” True PatriotsTM, but doesn’t characterize them in any way.
Take it with a grain of salt, consider the date it was written, and the overall tone of the piece.
But there’s nothing new under the sun. And – with billions – there are really a shit-ton of nice places in the world to live 
No, it’s quite easy. Just eliminate as many tax loopholes as practically possible, and set progressive tax rates geared to income.
There are two major reasons for the growing income and wealth gaps between the super-rich and the rest of us. One is that the super-rich have access to a vast variety of investment income sources that the rest of us do not. Wealth begets wealth, as the saying goes. The second is that the super-rich have access to tax avoidance schemes that the rest of us do not (Elon Musk pays less income tax than the average upper-middle-class taxpayer; many, like Trump, pay essentially no tax at all, although to be fair Trump is beset by an almost comical history of losses from failed businesses).
I completely agree. Also, because the wealthy control the nation’s legislative processes, it will never happen.
my impression is that the argument they are making is that easy access to capital makes it easier to start businesses which grows the economy.
However what seems to be really happening is that the world is awash is capital, there is just nothing to invest in. there are endless trillions in capital that is held by corporations and wealthy individuals, but no real good investment vehicles. in 2019 Blackrock said there was 70 trillion in idle capital globally without good investment vehicles to put it in. since wealth inequality got worse with covid it’s probably closer to 100 trillion now.
this means the rich over invest in certain assets and cause bubbles. housing bubbles, stock market bubbles, ghost cities in China, etc. could this be why companies like Tesla are now worth more than pretty much all other car companies combined?
If there were tons of great business investment opportunities and a shortage of capital, then supply side tax cuts would probably help. but we’re in the opposite situation.
But the main reason politicians support them is they want to reward rich people who fund their campaigns. everything else is smokescreen
the money was mostly used for stock buybacks
That’s an interesting observation. When you think of particularly prosperous times (e.g. the roaring 20s; the 50s; the 90s), it seems to correspond with new innovations and technology to provide something to invest in.
In the 20s, it was radio. In the 50s, there was television. In the 90s, there was the internet. As leaps in technology offered new platforms and new arenas, there was a place to put capital, and the economy seemed to flourish.
If that is accurate, then it seems we need to await some new innovation - but if that is the driver of our economic engine, how do we reliably produce it?
This article discusses it a bit.
https://www.nytimes.com/2016/01/24/magazine/why-are-corporations-hoarding-trillions.html
For several industries, hoarding cash is clearly correlated with negative results. When publishing and entertainment companies or aircraft manufacturers hold on to extra cash, investors perceive that money to be worth less than it should, somewhere in the neighborhood of 40 cents on the dollar (the authors make a specific estimate for each industry but also provide a range to account for error). The defense and coal industries are considerably worse, with a dollar in savings valued negatively. This might suggest protective behavior by chief executives in those industries, because the market is clearly not valuing their decision to save.
For other industries, though, a dollar of savings is worth a lot more than itself. For pharmaceutical companies, a dollar in savings is worth $1.50. For software firms, it’s even higher: more than $2. This means that investors are behaving as if they trust the executives in these industries, like Larry Page of Alphabet, to be smarter about using that money than the investors themselves could be. And a cursory scan of the industries in this second group — which also includes automakers, medical-equipment makers and others — correlates well with the ones hoarding the most cash. Corporations, it seems, may have amassed at least a good chunk of that $1.9 trillion in mysterious savings because the stock market is rewarding them for it.
Which leaves one last question: Why? The answer, perhaps, is that both the executives and the investors in these industries believe that something big is coming, but — this is crucial — they’re not sure what it will be.
Entrepreneurs almost by definition waste more money than government, since 90% of them, at least, will fail, so all money spent is pretty much wasted. It was interesting to see how when government played VC for high risk businesses people screamed bloody murder, but non-government VCs are fine. And of course start ups waste money beyond going broke - during the Bubble they bragged about it.
I’m curious - when has government picked winners and losers recently - aside from Trump trying to shore up the coal industry, that is.
Simplifying the tax code seems to be a code word for reducing the number of brackets - which has very little to do with how difficult filling out a tax form is. Most of the complexity is in areas which 80% of taxpayers, at least, will never see. And which work for the wealthy, so I agree with you.
Well, my perspective is that of the Canadian government since I live in Ontario. Canada is a confederation of provinces with different resources, strengths and population. Governments try to balance some of these discrepancies with equalization payments from some provinces to other provinces traditionally poorer, supporting businesses in remote regions and supporting ethnic ventures. The reasons are largely reasonable, but things like equalization payments do not always keep up with economic changes (bad year in wealthy province, bumper crop or new resources discovered in poorer province) and are controversial in some areas.
Canada also has many cozy duopolies which dominate certain industries and benefit from regulatory barriers to entry. During Covid, some businesses made more profits because they were deemed essential and allowed to open, and some smaller businesses felt this was not always fair. The process for subsidizing businesses in Covid was not always transparent. A few industries are particularly dependent on government contracts and largesse.
I am not judging these things here, which are complex and have both good and bad points. But they are a form of market intervention, even before discussing lobbyists and composition of company boards.
I don’t think this is accurate. I found this article on funding sources for university research. It suggests government funding of basic research is less than 50%…
It’s been brought up that it make not make too much sense to compare marginal tax rates from, say, the 50s to those of today because there were loopholes and deductions that meant that no one really paid those rates.
So, OK. Can someone come up with a source that delineates what taxpayers at certain income levels actually paid in taxes in a given year? I’m thinking something along the lines of “The top ten percent of taxpayers had gross income averaging $x in 1960 and paid $y in federal income taxes.” It seems to me these data ought to be available.
Then, assuming there’s some measure of what constitutes a “good economy” – growth in GDP, maybe? – we could correlate what was actually paid in taxes by different income levels with the economic measure. Would this not be an indication of whether “trickle down” works?
Also, during the pandemic people received “stimulus” payments. It would seem that by now there would be some info on what effect these payments had on the overall economy. Wouldn’t those data be somewhat of a measure on how “trickle up” economic policy might work?
From the first paragraph of that article:
For the first time in the post–World War II era, the federal government no longer funds a majority of the basic research carried out in the United States. Data from ongoing surveys by the National Science Foundation (NSF) show that federal agencies provided only 44% of the $86 billion spent on basic research in 2015. The federal share, which topped 70% throughout the 1960s and '70s, stood at 61% as recently as 2004 before falling below 50% in 2013.
If you read on you’ll find that the bulk of that funding is in the area of pharmaceutical research, and while it is described as “basic research” rather than applications, it is often for specific areas that benefit the donor’s research objectives rather than funding novel science. Historically, the government has been the major funder of both basic and applied research, largely through the National Science Foundation (NSF), Advanced Research Projects Agency (ARPA/DARPA), Department of Energy (DoE), the US Geological Survey (USGS), and military branches, plus a smattering of research funds from the Department of Agriculture, Department of Education, et cetera.
I’m sure that some would argue that corporate funding is preferable because it ensures that funding is going to applied sciences instead of useless things like counting the number of a certain type of butterflies in a field or on “blue sky” research that is unlikely to yield anything of value, and therefore is a more optimal use of money. Setting aside the fundamental value in developing basic science, the problem with corporate funding in applied sciences is that it often comes with restrictions on publication and dissemination of knowledge the field in general; corporations naturally want a return on investment in terms of a competitive advantage of intellectual property, proprietary information, and so forth, that limits general utilization. Most university research, even that done under the auspices of DARPA or military funding, is openly publishable (with rare exceptions for applications such as “stealth” technologies) because of the advantage it provides to the industrial base as a whole.
As for innovations, many if not most of the technological innovations, and particularly in computing, communications, energy, aerospace propulsion and control, advanced materials, et cetera, were either funded as part of government (and generally military) research and development, or are actually a result of military programs that were then provided for secondary use by corporations. A prime example is the Global Positioning System, which at US$14B in 2020 dollars is far more than any individual use or even a consortium would every put together the capital to fund based upon amortization based upon revenues, and yet is provided at no cost to companies and individual users forming a multibillion dollar industry today that keeps growing in both application and users. The same is true for the Internet (heritage from ARPAnet), modern digital computing (Minuteman II), nuclear power (US Navy program), and of course direct adaptations of military technologies such as airliners and space launch vehicles.
Stranger