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Trickle down Tax Policies do not work

donaldjtrump.com

Commentary: Here we go again. Trump and the Republicans want to cut taxes for Corporations and the rich, with the hope that it will boost the economy. Even though we have tried this dishonest policy many times in the past—it never works. In the Harding/Coolidge Administration in the 1920’s they reduced taxes and limited trade--leading to wild speculation in stocks. Rich got richer and poor got poorer—finally leading to the great depression in 1929. Under the Reagan Administration they again cut taxes for the rich, increased military spending and reduced effectiveness of labor unions. These policies resulted in tripling the debt and depressed wages for the middle and poorer classes. 

Again, early in the 21st century the George W. Bush Administration passed tax cuts. They cut Capital Gains tax by ½ to a 15% rate and individual tax rate a few percentage points. Since most investments are held by the rich--they benefitted the most. From 2001 to 2008 there is no evidence that any increase in economic growth occurred because of these tax cuts. In fact, there was more economic growth in the 1990’s when there were tax increases. The biggest issue was the cost of going to war in Afghanistan and Iraq that was paid for with many trillion dollars of debt and $3 trillion taken from the Social Security trust fund. First time we went to war without paying for it. Than the 2008 housing mess occurred, causing the greatest economic decline since the great depression.

Trickle down tax policies does not grow the economy in any significant way and sure doesn’t help the average wage earner--so why are we doing it again? I would argue that it is the corporations and billionaires like the Koch Brothers that now control our politics and the economy. They want the rest of us to act like serf’s and bend our knees in admiration. I am not the only Economist who thinks that this is what is happening. Nobel Economists Paul Krugman and Joseph Stiglitz have also argued that tax cuts for the rich does not grow the economy or help the average person.

Paul O’Connell, Ph.D. Economist & former World Bank Employee