Trickle or treat

Who's laughing now? Photo credit: Biography

Trickle-down theory is back in the headlines this year with President Donald Trump’s One Big Beautiful Bill that extended the income tax cuts targeting the rich from the 2018 Tax Cuts and Jobs Act. The theory says we can grow the economy by cutting income taxes on the rich, because they save more of their income than the poor. They will invest the tax cut in factories that create jobs and future income. Well, the theory has three problems.

First, if we don’t tax the rich, we must tax the poor. Millionaires would have paid the tax out of savings. But the poor must consume most of their income. To pay the tax, they must spend less. That will slow the economy. Or, if we don’t tax the rich or poor, the government must spend less. But that means paring back Social Security, Medicare and Medicaid. That cut amounts to a tax on the poor. The only other option is to tax economic growth itself. But the whole point of trickle-down theory is to spur growth, not brake it.

Second, it seems unfair to tax most heavily those least able to pay for services that we all enjoy, like national defense and clean air. If anything, the valuation of these services rises with income, so it would be fair to increase the tax rate with income, too.

Third, the theory misses the point. Yes, we must save to grow the economy. We must set aside funds to finance the factory. So why not cut taxes on savers rather than on the rich? You don’t have to be Daddy Warbucks to save. – Leon Taylor, Seymour, Indiana USA tayloralmaty@gmail.com