TRICKLE-DOWN ECONOMICS

The phrase "trickle-down economics" was first used as a joke by American

humorist Will Rogers in 1932. It gained popularity in the 1980s under the
Reagan administration and is now frequently used to criticise economic policies
that benefit the wealthy or privileged while being presented as beneficial to
the general populace. Any policy that provides tax breaks, government
spending, or regulatory relaxation to big businesses and rich individuals in an
effort to stimulate economic growth is referred to as a trickle-down policy. This
idea supports a less tax burden for those at the top of the economic scale. But
the question of whether tax cuts for the wealthy boost the economy and assist
the less fortunate continues to be raised.
Our analysis shows that trickle-down economics, when used, may have both
beneficial and detrimental consequences on the economy. The advantages
include increased output, new investment, employment possibilities,
disposable income, and household spending, as well as a larger tax base. The
drawbacks include the fact that it has disproportionately benefited the rich,
increases income disparity over the short- and medium-term, and eventually
results in austerity measures like cuts to investments and critical services.
Mehrun Etebari provided four arguments against trickle-down economics, and
they are as follows:
1. Lowering the top tax rate will not result in increased economic activity.
2. Lowering the top tax rate does not result in an increase in income.
3. Wage growth is not a result of lowering the highest tax rate.
4. Reducing the top tax rate will not result in more jobs being created.
Additionally, research was done to determine all instances of significant tax
cuts for the wealthy in 18 OECD nations between 1965 and 2015. Next, it was
estimated how these significant tax reforms would generally affect important
macroeconomic aggregates. It has been discovered that tax breaks for the
wealthy increase income disparity in the short and medium terms. On the
other hand, neither unemployment nor economic growth are significantly
impacted by the measures.
In light of the findings, it is clear that tax breaks for the wealthy do not "trickle
down" to benefit the general economy.
In conclusion, we demonstrate that trickle-down economics actually increases
income disparity rather than improving economic performance. Consequently,
the following suggestions were made to prevent this inequality:
1. Progressive taxation needs to be implemented.
2. To ensure that revenue is distributed equally, corruption must be eradicated.
3. Introduction of the Green Tax