The revenge of Trickle-down economics

Does money flow “up” – towards those with wealth and resources? Or does it flow “down”?

By Morf Morford

Tacoma Daily Index

In what could only be described as yet another example of “Captain Obvious strikes again,” an extensive study of the economic policies of 80 countries shows what anyone with even a rudimentary understanding of economic principles would take as a given; so-called “Trickle-down” economic policies contribute to, or even create, income inequity. You can see more on this study here

The premise is very simple and is based on a core assumption about how money flows in an economy.

Does money flow “up” – towards those with wealth and resources? Or does it flow “down” towards those with limited skills and resources?

Taxes, salary scales, even status (as in freedom, privileges and rights) is aligned with value as ascribed accordingly.

So what direction do power and rights go?

Do people with wealth and power accumulate or attract more wealth and power? Do the wealthy and powerful have privileges others, especially those of “lower” classes do not?

I’m sure we all know the answers to those questions.

In something like an economic pull of gravity, wealth and power and correlative privileges accrue and accumulate toward where they already exist.

You don’t need a degree in marketing or economics to understand that money and power goes to those who have desirable resources.

Those who are in need buy or bargain (or steal from) those who have essential resources.

The flow could not be more obvious.

The only thing the poor have to offer is their bodies, largely through their labor.

But everything gravitates, literally, towards those who already hold power and wealth.

Taxes, or tribute, through-out history, especially in certain eras, as in the Feudal times, was premised on the reality that there was the “lord of the manor,” and those who were poor (which was the vast majority) owed their sweat and labor (if not sheer existence) to those “above” them; their “betters” as the British not-so-subtly described it.

The Feudal system was a two-tiered, “K” shaped economy with “lords” who owned everything and the “vassals,” servants (or peasants) who were legally “owned” by, and considered property of, the land owners. “Tribute” was paid by the poor to the rich. There was no middle class.

Taxes, in those times, were just the officially authorized continued confirmation of what everyone believed; the poor owed everything they had to the wealthy – and those in power had every “right” to punish, exploit, even kill their own property – it was justified by being “God’s will” or the divine right of kings or anything else those with power could think of to cajole and control the masses.

If you know your American history, this was exactly the set of beliefs that the Declaration of Independence addressed and opposed.

A “K” shaped economy, with limited, or even non-existent options for social mobility is the ideal medium for nurturing rebellion, mistrust and open revolution – which wracked Europe for centuries.

“We the people” was a declaration of independence and autonomy – and a call, aspirational and limited at the time, to equality, freedom and individual agency.

Yes, we’ve struggled since then to define who has freedom to do what (as in marriage equality, racial equity, gun rights and hundreds more) and, yes, we’ve argued about taxes continually.

You’d think we would have figured out taxes by now.

If you thought of taxes as a normal business venture for example, with an ROI (return on investment) you’d quickly come to the conclusion that soaking the poor would give you a low return.

What region has the highest rate of tax auditing in America would you guess? New York? Chicago? Los Angeles? Miami?

Nope. None of those places are notorious for tax scammers; they have good lawyers. And elaborate tax avoidance schemes.

The IRS tax audit epi-center is ( Humphreys County, Mississippi, literally one of the poorest counties in the country. You have to wonder why the IRS would even bother, but it’s easy to meet a quota of audits if people are too poor to litigate.

Tax appeals and resulting lawsuits can linger for years.

But every so often in history, a move is made to use taxes to equalize resources, not tilt them toward the upper class.

Taxes, instead of going to elaborate palaces or art collections, or even imperialist ventures, would go to projects and systems accessible to anyone. From electric grids, to public highways and parks, even airports, taxes went to pay for public well-being.

Wealth, for a time, went the opposite direction nature seemed to direct.

Human will and intervention redirected the wealth of a few nations from the select few to a vast majority.

In the USA this led to the largest middle-class the world had ever seen. Higher education, travel and affluence seemed to have no limits as each generation seemed to, and most did, have dramatically longer, healthier and more prosperous lives than their predecessors.

The USA had a marginal tax rate over 90% for most of the 1950s and early ‘60s,, and it hovered in the 70% range for most of the 1970s.

And then, like white polyester bell-bottoms and disco music, 1970s politics entered the scene and gave us the “trickle-down” theory of taxes.

The idea is simple – don’t tax the wealthy (we don’t want to “punish” success) and allow them to spend their money and distribute it across the economy.

Two big problems became immediately evident; first, how many yachts or mansions can a wealthy person buy and how many gardeners, cooks and nannies can a wealthy family employ and second, all that “excess” money did not go into local economies – it went into international tax havens. Where billions, even trillions of dollars sit.

Meanwhile, here in the USA our infrastructure, from rail lines to water systems, bridges and freeways, is disintegrating in front of us and endangering us all.

Any of this could have been foreseen with anyone with a pencil and a little bit of thought, but such things were rare back in the late 1970s and early ‘80s apparently.

Giving the wealthy and powerful even more wealth and power and hoping that their spilled crumbs would support a solid and durable economy was about as wise as buying that pair of white polyester bell-bottoms.