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Exploratory Essay: The "Trickle Down" Theory
Introduction
According to the "trickle down" theory, decreasing capital and marginal gains or rather taxes particularly for the upcoming entrepreneurs, corporations and investors will fundamentally boost the comprehensive economic growth and production (Sowell 2). To add to this, according to this theory, it is apparent that the stimulus acquired following a decrease in tax to corporations, and the rich will boost wealth creation and the overall economic growth that is not only beneficial to those who pay low tax rate but essentially to the general public. By reflecting on the "trickle down" theory, this paper will explore deeply the theory by generating research equations and offering answers that I perceive to be right.
Research Questions and their Responses
According to the "trickle down" theory, the benefits acquired by the big business and the “elites” or rather the rich will be channelled down to the consumers and small businesses, how best do you understand this conception? According to me, I think the conception that wealth will be trickled down to small businesses and consumers when tax rates are cut for the rich Americans, is not practical. Evidently, if this policy was practical, its outcome subsequent to the years of its implementation could have proved otherwise. The past 40 years that has seen a gradual decrease in the top bracket income tax rate has essentially not reflected an increased life quality in the country, this means that, giving tax breaks to high earners will invest and benefit on their own without trickling down the benefits to the consumers at the ground. By comparing the changes that took place following the cuts in the top tax rate to that of the America’s (Goss Domestic Product) GDP (growth indicator of any country), and to other indicators that include job creation, changes in the hourly income of an average American, and annual median income growth, it is apparent that tax cuts for the rich and high income corporations is not the best way to fuel economic growth in America (Reese and David 132), this is basically because the top earners will acquire more money they will utilize in making more investments with no apparent change in the lives of those whom the policy was intended for (low income earners).
Do you think that cutting down top tax rate will theoretically lead to wage growth? To me, I don’t think this works in practical. Despite the fact that this worked subsequent to Reagan’s tax cuts during the 1980s two years after the cuts were effected, the succeeding years after 1980’s proved the "trickle down" theory wrong (Busch 125). Essentially, the policy of cutting down the tax of the top earners for the benefit of all and economic growth does not work in a broad sense though the policy worked as perceived during its early years of implementation. In support of the fact that the "Trickle Down" Theory is not effective when viewed from a broader perspective, generally, based on an analysis that focused on the hourly wages across the years since the 1980’s to date, it is evident that hourly wages increased more when taxes were higher as compared to when top taxes were lowered (Busch 126). This analysis practically disapproves the "trickle down" theory, since a positive indication of economic growth was deleterious.
Some argue that the "trickle down" theory really do make the rich get richer, a notion that contrast the initial intent of the theory, what is your stand on this? I totally consent with the fact that indeed the rich get richer if the policy of cutting down top taxes is implemented. several reasons can prove me right on this case, to begin with, the economy of the US incredibly grew over the past four years, however, to whom did the economy go to? The answer is, the economy went to the rich and corporations, the same people who immensely benefitted from the tax cuts. In a more critical view, when taxes cut for the rich, they get extra money, they will use this money to make more investments. Instead of making the low income earners gain from the “trickle down” Theory, the rich get richer instead of relieving the burden off the low income earners. To ascertain this notion, corporate profits rose incredibly over the past 3years with the real income of the rich showing the same trends (McMurtry 105). If the "trickle down" theory is to be implemented further by cutting top taxes, it is apparent that the elites will remain at the top while the consumers and small being left at the same level.
Works Cited
Busch, Andrew E. Ronald Reagan and the Politics of Freedom. Lanham [u.a.: Rowman &
Littlefield, 2001. Print.
McMurtry, John. Unequal Freedoms: The Global Market As an Ethical System. Toronto:
Garamond Press, 2008. Print.
Reese, Laura A, and David Fasenfest. Critical Evaluations of Economic Development
Policies. Detroit, Mich: Wayne State University Press, 2004. Print.
Sowell, Thomas. Trickle Down Theory and Tax Cuts for the Rich. Stanford, Calif: Hoover
