Dawson Murray

  • commented on Trickle-Down Economics: Four Reasons Why It Just Doesn't Work 2021-03-17 14:47:38 -0400
    Trickle Down Economics was a phrase coined by FDR’s speech writer Samuel Rosenman when he criticized the tax cuts of the 1920s under Secretary of the Treasury Andrew Mellon. No one at that time who proposed tax cuts ever had in mind the idea that if they cut taxes on the rich the money will “trickle down” to everyone else. Mellon’s main concern was in the fact that under the high top marginal tax rate of 73% most people making above $100,000 dollars invested in tax-exempt bonds that sheltered their money from the tax collector. In 1921 the total tax revenue was $700 million, those making above $100,000 on paid 30% of the total, while the rest was left to lower income earners.
    Over the next few years and a series of tax cuts, the top marginal tax rate cut to 24%, the overall tax revenue for that year was over $1 billion, and those making above $100,000 payed 65% of that total. This significantly reduce the tax burden on low income earners. For example those making below $5,000 in 1920 paid 15.4% of the total revenue and in 1929 the paid 0.4%. If you want more revenue from the rich, don’t incentives them to store their money in places you can’t reach it by raise taxes. Lower them and they will pay more.

    sources: https://www.jstor.org/stable/24441285?seq=1#metadata_info_tab_contents, and https://www.hoover.org/sites/default/files/uploads/documents/Sowell_TrickleDown_FINAL.pdf

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