Its Turns out Trickle Down Economics Doesn't Work

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**LoneLictor**

Well, it does work if what you mean is that gak is trickling down onto the poor people, but otherwise it doesn't. Look at this new Congressional report, with all sorts of pretty graphs and legitimate sources.

http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf

**Vulcan**

It's nice to see all the added details, but it's been obvious it doesn't work for five years now.

Thesis: When the rich have more money and pay less taxes, they create more jobs.

FACT: Tax rates are at historic lows.

FACT: Corporations are posting record profits.

FACT: The top 1% has more proportional wealth than they have since the 1930s.

FACT: There are very few new jobs being created.

Conclusion: MYTH BUSTED.

**Mannahnin**

Vulcan wrote:
It's nice to see all the added details, but it's been obvious it doesn't work for five years now.

I think you mean thirty. Incomes have been going down for the middle class and up for the rich for decades. Look at the proportional difference between CEO pay and the average worker at their company. The differential has skyrocketed up and up.

**MrScience**

This is clearly a ploy by the socialist atheist agenda of Obama. He obviously signed off on this while reading his Quran.

Wake up sheeple!

**Bromsy**

MrScience wrote:
This is clearly a ploy by the socialist atheist agenda of Obama. He obviously signed off on this while reading his Quran.

Wake up sheeple!

Quite.

**Vulcan**

MrScience wrote:
This is clearly a ploy by the socialist atheist agenda of Obama. He obviously signed off on this while reading his Quran.

Wake up sheeple!

I hope to God you just forgot the [/sarcasm] at the end of your post...

**Jihadin**

I'm on vicoden and Lunesta....why would I want to wake up and be a sheple?

**daedalus**

MrScience wrote:
Wake up sheeple!

What have you done?!

**azazel the cat**

Dammit, you beat me to the XKCD comic.

Anyway, yeah, yet another report to prove the obvious truth that workers are hired only as an absolute necessity, and would not be paid if the employer could avoid it.

**Kilkrazy**

I remember when Thatcher and Reagan were talking about "trickle down" in the early 1980s, a commentator described it as the notion that by feeding more high quality grain to horses, there will be more husks in the horse droppings for sparrows to glean.

**KingCracker**

I think it would work, if the rich actually used that money for things that would stimulate the economy. Problem is....it mostly doesnt, and when they arnt buying expensive imports from other countries, they are just hording their money.

**Vulcan**

Of course rich people don't spend their money - having that money in the bank is what makes them rich in the first place!

Rich people spend only a very small portion of their annual income and save the rest. They can afford to. Contrast this with a middle-class person, who is doing very well to save a tenth of what they earn in a year.

Then tell me again how giving money to someone who saves the majority of what they get - which removes it from the economy - is somehow better than giving money to someone who will spend 90% of it - which RETURNS it to the economy!

**Mannahnin**

The contrary argument is that they do put into the economy through investment, and that's why we tax capital gains at a lower rate; to encourage that investment.

That being said, yeah, putting more money in the hands of people who will actually spend it does act as more immediate and consistent economic stimulus.

**Testify**

You're 30 years too late

**sebster**

The theory begins and ends it's complete fail when it pretends that it is only the wealthy that invest. That was probably true in 1800, but the rise of middle class has meant for at least a century the primary source of investment funds has been the savings of the middle class. The whole banking system is basically a vehicle for the savings of the middle class to be lent out to the wealthy investor class for investment.

**Ahtman**

Disney tried to warn us years ago about how the wealthy really use their money.

**nomotog**

Mannahnin wrote:
The contrary argument is that they do put into the economy through investment, and that's why we tax capital gains at a lower rate; to encourage that investment.

That being said, yeah, putting more money in the hands of people who will actually spend it does act as more immediate and consistent economic stimulus.

That brings up something I have always wondered about trickle down. We know giveing rich people money dosen't mean much because they don't reinvest that into the economy, but what about corporations? A business will spend all there money and then get a lone so they can spend more. What would happen if we just cut the corporate tax to 0?

**Huffy**

nomotog wrote:

That brings up something I have always wondered about trickle down. We know giveing rich people money dosen't mean much because they don't reinvest that into the economy, but what about corporations? A business will spend all there money and then get a lone so they can spend more. What would happen if we just cut the corporate tax to 0?

Not necessarily, Corporations will often sit on their profits to make a "war chest". This is the current economic situation, no one wants to take on risky investments/loan right now, so more corporations are playing it safe and building up their reserves.
You reduce corporate tax to zero?? You lose a lot of Income for governments and your personal taxes will increase to make up the loss or your government stops paying for services!

**Vulcan**

Mannahnin wrote:
The contrary argument is that they do put into the economy through investment, and that's why we tax capital gains at a lower rate; to encourage that investment.

Only they don't.

They send their money to overseas banks, or they invest in the market, buying shares in companies that they expect to pay big dividneds. And who do they buy the shares from? Most often from someone OTHER than the company - which means the company doesn't see one thin dime of the money.

Remember that: The company only gets money from sale of their stocks when they're doing the selling. Third-party sales mean nothing to the company. And money in the market tends to stay in the market, rather than get out and be used in the wider economy outside the stock exchange.

Automatically Appended Next Post:

nomotog wrote:
Mannahnin wrote:
The contrary argument is that they do put into the economy through investment, and that's why we tax capital gains at a lower rate; to encourage that investment.

That being said, yeah, putting more money in the hands of people who will actually spend it does act as more immediate and consistent economic stimulus.

That brings up something I have always wondered about trickle down. We know giveing rich people money dosen't mean much because they don't reinvest that into the economy, but what about corporations? A business will spend all there money and then get a lone so they can spend more. What would happen if we just cut the corporate tax to 0?

Right now corporations are playing the market rather than investing in their businesses, because they can make more money on the market with the exceedingly low capitol gains tax rate than they can by... you know, doing business.

Raise capitol gains to 35% or so and give a hefty tax break to companies for paying PAYROLL (as opposed to bonuses) and you'll see corporations fall all over themselves hiring people to save taxes.

**sourclams**

Vulcan wrote:
Raise capitol gains to 35% or so and give a hefty tax break to companies for paying PAYROLL (as opposed to bonuses) and you'll see corporations fall all over themselves hiring people to save taxes.

This idea is hilariously wrong and basically the complete opposite of anything that even begins to make intuitive sense, right down to the typo on 'capitol gains'.

Increase capital gains tax, and you create barriers to business, essentially raising the expenses of doing business. That's not even 'IMO', it's basically a textbook definition.

Then you suggest that tax breaks on head count will offset this expense, but headcount has its own expense associated with it (and a lot of front-loaded expenses, like training and the logistics of dealing with headcount expansion), so all you're really doing is giving a 'buy one, get one free... in six months' coupon. So mathematically, your equation looks like this:

Expense + (Expense/2) = Growth

**Seaward**

Can't I just vote for Romney now because I make more money than I did when I voted for Obama and want to keep more of it?

**sebster**

nomotog wrote:
That brings up something I have always wondered about trickle down. We know giveing rich people money dosen't mean much because they don't reinvest that into the economy, but what about corporations? A business will spend all there money and then get a lone so they can spend more. What would happen if we just cut the corporate tax to 0?

Any ater tax profit that is not needed for re-investment will be paid to shareholders as dividends.

The problem with trickle down, essentially, is that investment isn't driven by having spare cash lying around. Neither people nor corporations look in the bank, see they've got a spare million and decide to start a new store. Investment is driven by demand - those people and corporations see there is demand in the market that is not met by them or their competitors, and they expand to meet that demand. Maybe they have the money on hand but more likely they don't, at which point they will borrow it.

But the point is that investment comes from there being consumers with cash out there demanding products. This leads to investment, which leads to employment, leading to more cashed up consumers and so the feedback cycle is created. Simply having rich people with money doesn't achieve anything, if there's no investment opportunities for them to seek profits from.

Automatically Appended Next Post:

Vulcan wrote:
Remember that: The company only gets money from sale of their stocks when they're doing the selling. Third-party sales mean nothing to the company. And money in the market tends to stay in the market, rather than get out and be used in the wider economy outside the stock exchange.

Umm, no. Money moved through third party sales is never "in the market". It can't be, because for every buyer putting his money in, there's a seller. I buy your BHP share for $50, and I lose $50 but you gain $50. The amount of money in the hands of people to be spent outside the market is unchanged.

Automatically Appended Next Post:

Right now corporations are playing the market rather than investing in their businesses, because they can make more money on the market with the exceedingly low capitol gains tax rate than they can by... you know, doing business.

Raise capitol gains to 35% or so and give a hefty tax break to companies for paying PAYROLL (as opposed to bonuses) and you'll see corporations fall all over themselves hiring people to save taxes.

Make it simpler. Drop payroll taxes. Make them not exist. Don't tax companies for hiring people.

Then do something else even more radical - make company tax 30% or 35%, but stop double taxation when it's paid to shareholders - give those shareholders a tax credit for every dollar already paid on their income by the company.

And don't give capital gains tax its own special treatment. Roll it up into income tax - why should it matter if I profited by selling my labour or selling some land, if either way I brought in $100,000 in the year? Any issues with spikes to income from one time sales can be dealt with under income averaging provisions that are already in place.

That'll give you a healthy shortfall in tax revenue, which you make up by raising the most direct, sensible tax - income tax.

Automatically Appended Next Post:

sourclams wrote:
Increase capital gains tax, and you create barriers to business, essentially raising the expenses of doing business. That's not even 'IMO', it's basically a textbook definition.

Umm, a tax on profit isn't an expense of doing business, it's a profit reduction. It works entirely differently to variable and fixed expenses.

Then you suggest that tax breaks on head count will offset this expense, but headcount has its own expense associated with it (and a lot of front-loaded expenses, like training and the logistics of dealing with headcount expansion), so all you're really doing is giving a 'buy one, get one free... in six months' coupon.

When something is more expensive, a buyer will buy less of it. This is what's known in economics as fething obvious. Reducing the cost of something makes a buyer buy more of it. Again, the economic term is 'fething obvious'.

Reducing the cost of labour, by removing payroll tax, makes it cheaper. I hope I can now sit back and watch you put all the pieces together.

**whembly**

sebster wrote:
nomotog wrote:
That brings up something I have always wondered about trickle down. We know giveing rich people money dosen't mean much because they don't reinvest that into the economy, but what about corporations? A business will spend all there money and then get a lone so they can spend more. What would happen if we just cut the corporate tax to 0?

Any ater tax profit that is not needed for re-investment will be paid to shareholders as dividends.

The problem with trickle down, essentially, is that investment isn't driven by having spare cash lying around. Neither people nor corporations look in the bank, see they've got a spare million and decide to start a new store. Investment is driven by demand - those people and corporations see there is demand in the market that is not met by them or their competitors, and they expand to meet that demand. Maybe they have the money on hand but more likely they don't, at which point they will borrow it.

But the point is that investment comes from there being consumers with cash out there demanding products. This leads to investment, which leads to employment, leading to more cashed up consumers and so the feedback cycle is created. Simply having rich people with money doesn't achieve anything, if there's no investment opportunities for them to seek profits from.

Automatically Appended Next Post:

Vulcan wrote:
Remember that: The company only gets money from sale of their stocks when they're doing the selling. Third-party sales mean nothing to the company. And money in the market tends to stay in the market, rather than get out and be used in the wider economy outside the stock exchange.

Umm, no. Money moved through third party sales is never "in the market". It can't be, because for every buyer putting his money in, there's a seller. I buy your BHP share for $50, and I lose $50 but you gain $50. The amount of money in the hands of people to be spent outside the market is unchanged.

Automatically Appended Next Post:

Right now corporations are playing the market rather than investing in their businesses, because they can make more money on the market with the exceedingly low capitol gains tax rate than they can by... you know, doing business.

Raise capitol gains to 35% or so and give a hefty tax break to companies for paying PAYROLL (as opposed to bonuses) and you'll see corporations fall all over themselves hiring people to save taxes.

Make it simpler. Drop payroll taxes. Make them not exist. Don't tax companies for hiring people.

Then do something else even more radical - make company tax 30% or 35%, but stop double taxation when it's paid to shareholders - give those shareholders a tax credit for every dollar already paid on their income by the company.

And don't give capital gains tax its own special treatment. Roll it up into income tax - why should it matter if I profited by selling my labour or selling some land, if either way I brought in $100,000 in the year? Any issues with spikes to income from one time sales can be dealt with under income averaging provisions that are already in place.

That'll give you a healthy shortfall in tax revenue, which you make up by raising the most direct, sensible tax - income tax.

Automatically Appended Next Post:

sourclams wrote:
Increase capital gains tax, and you create barriers to business, essentially raising the expenses of doing business. That's not even 'IMO', it's basically a textbook definition.

Umm, a tax on profit isn't an expense of doing business, it's a profit reduction. It works entirely differently to variable and fixed expenses.

Then you suggest that tax breaks on head count will offset this expense, but headcount has its own expense associated with it (and a lot of front-loaded expenses, like training and the logistics of dealing with headcount expansion), so all you're really doing is giving a 'buy one, get one free... in six months' coupon.

When something is more expensive, a buyer will buy less of it. This is what's known in economics as fething obvious. Reducing the cost of something makes a buyer buy more of it. Again, the economic term is 'fething obvious'.

Reducing the cost of labour, by removing payroll tax, makes it cheaper. I hope I can now sit back and watch you put all the pieces together.

Hey Seb... I like what you said here...have an exalt. I especially like your point on removing the payroll tax.

Automatically Appended Next Post:

Seaward wrote:
Can't I just vote for Romney now because I make more money than I did when I voted for Obama and want to keep more of it?

Free country... vote how you'd like.

My cuz is voting for Obama because doesn't like Romney's hair...

I think she's joking... maybe...but, I don't really know