Sunday, July 8, 2012

Trickling Down, According to Wikipedia


"Trickle-down economics" and "the trickle-down theory" are terms in United States politics to refer to the idea that tax breaks or other economic benefits provided by government to businesses and the wealthy will benefit poorer members of society by improving the economy as a whole.[2] The term has been attributed to humorist Will Rogers, who said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy."[3] The term is considered pejorative by some proponents of tax cuts.[4]
Proponents of these policies claim that if the top income earners are taxed less that they will invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.[citation needed] Proponents argue that economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that "trickle-down" policies generally do not work,[5] and that the trickle-down effect may be very slim, if indeed it even exists at all.[6]
Today, "trickle-down economics" is most closely identified with the economic policies known as Reaganomics or supply-side economics. Originally, there was a great deal of support for tax reform; there was a dual problem that loopholes and tax shelters create a bureaucracy (private sector and public sector) and that relevant taxes are thus evaded. During Ronald Reagan's presidency, the Democratic Party-controlled House, at the urging of President Reagan, cut the marginal tax rate on the highest-income tax bracket from 70% to 28%.
A major feature of these policies was the reduction of tax rates on capital gains, corporate income, and higher individual incomes, along with the reduction or elimination of various excise taxes. David Stockman, who as Reagan's budget director championed these cuts at first but then became skeptical of them, told journalist William Greider that the term "supply-side economics" was used to promote a trickle-down idea.[7]
"It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."[8]


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