Trickle Down Theory and Tax Cuts for the Rich by Thomas Sowell
Requirements: ePub, Mobi or PDF viewer, 1.5 MB
Overview: Sowell outlines the evolution of "Trickle Down Theory."
His main points are that:
1. After World War I, Democrats and Republicans and even John Maynard Keynes, agreed that tax rates were too high. Because of the high rates of taxation, rich people tended to put their money into tax shelters, rather than investing in business ventures that employ people. This was not a politically divisive issue at the time.
2. No politician nor economist ever advocated anything called the "trickle-down theory." In fact, when tax rates are reduced, money is taken out of tax shelters and invested in business ventures that hire workers. The money goes directly to those workers, in hopes that the business will succeed and money will Trickle Up to the investors. FDR coined the phrase "trickle-down" as an epithet for his opponents.
3. The tax debate eventually became a political issue, with Democrats (but not JFK) advocating higher tax rates and Republicans advocating lower tax rates. At that point, Democrats started accusing Republicans of wanting to decrease tax rates because they only care about the rich. This is pure demagoguery; both parties previously admitted that when tax rates are too high, it diminishes revenues to the treasury and hurts the common working man who needs a job.
The pamphlet is short (main text 13 pages), to the point and very readable. It’s replete with numerous little-known facts about the politics of our past and even a little criticism of popular history texts.
Genre: Economic essay
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