I am shook, as a beloved former student used to say. A study conducted shows how trickle down economics, the accountant’s boondoggle illustrated by doggerel on a cocktail napkin by Arthur Laffer, has been a farce.
Tax cuts for the wealthy have long drawn support from conservative lawmakers and economists who argue that such measures will “trickle down” and eventually boost jobs and incomes for everyone else. But a new study from the London School of Economics says 50 years of such tax cuts have only helped one group — the rich.
The new paper, by David Hope of the London School of Economics and Julian Limberg of King’s College London, examines 18 developed countries — from Australia to the United States — over a 50-year period from 1965 to 2015. The study compared countries that passed tax cuts in a specific year, such as the U.S. in 1982 when President Ronald Reagan slashed taxes on the wealthy, with those that didn’t, and then examined their economic outcomes.
But the analysis discovered one major change: The incomes of the rich grew much faster in countries where tax rates were lowered. Instead of trickling down to the middle class, tax cuts for the rich may not accomplish much more than help the rich keep more of their riches and exacerbate income inequality, the research indicates.
“Based on our research, we would argue that the economic rationale for keeping taxes on the rich low is weak,” Julian Limberg, a co-author of the study and a lecturer in public policy at King’s College London, said in an email to CBS MoneyWatch. “In fact, if we look back into history, the period with the highest taxes on the rich — the postwar period — was also a period with high economic growth and low unemployment.”
The study stops at 2015. Meanwhile American billionaires have grown their collective wealth by $1 trillion since mid-March, goosed by Donald Trump’s economic policies and, yes, Barack Obama’s decision to leave the Bush tax cuts mostly intact. Emboldened by surviving prosecution for the largest wholesale Medicare fraud in American history as a private citizen, Senator Rick Scott of Florida (the state with the prettiest name!) was one of six nimrods to vote no on the spending bill because it encourages moochers or something. If Congress issued, say, a $3000 check to every adul in America it would still cost less than these tax cuts.