Notebook per
TRICKLE DOWN THEORY AND TAX CUTS FOR THE RICH
Citation (APA): Sowell, T. (2014). TRICKLE DOWN THEORY AND TAX CUTS FOR THE RICH [Kindle Android version]. Retrieved from Amazon.com
Parte introduttiva
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Trickle down theory.: una teoria mai formulata da nessuno... Caricatura della teoria: diamo ai più ricchi e le briciole ricadranno sui poveri. Facile critica della caricatura: allora diamo direttamente ai poveri. Ma questo è un modello superfisso!... La vera teoria: meno tasse + investimenti + reddito + gettito fiscale + quota del gettito a carico dei ricchi... Mellon: i ricchi tartassati investivano tutto in bot esenti. Ovvio che dopo il taglio il gettito aumentò... L'equivoco. I favorevoli: usare le tasse x cambiare i comportamenti. I contrari: arricchire i ricchi sperando che si arricchiscano anche i poveri mantenendo tutti gli stessi comportamenti... Come mai quando certi concetti li sostiiene Keynes, quando certe politiche le implementa Kennedy o Wilson non è trikle down theory?… Perchè la santa madre Svezia ha il sistema di tassazione meno progressivo del mondo? Ce l' ha forse coi poveri?… Usa: 4 esperimenti in 80 anni: Mellon, Kennedy, Reagan, Bush. I fatti confrrmano… Quando agire? non guardare all' aliquota domestica ma a quella dei vicini... Come agire? : decisi e convinti sul lungo termine. Presentare l'operazione come svolta culturale...
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“Trickle Down” Theory and “Tax Cuts for the Rich” Thomas Sowell
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particular individuals have argued that existing tax rates are so high that the government could collect more tax revenues if it lowered those tax rates,
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x LAFFER
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This is clearly a testable hypothesis that people might argue for or against, on either empirical or analytical grounds.
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x LA DISCUSSIONE SANA
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such proposals have
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x MENO TASSE X I RICCHI
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often been characterized by their opponents as “tax cuts for the rich”
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c
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the reasons for proposing such tax cuts are often verbally transformed from those of the advocates— namely, changing economic behavior in ways that generate more output, income and resulting higher tax revenues— to a very different theory attributed to the advocates by the opponents, namely “the trickle-down theory.”
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x IL TRUCCO DEI PARTIGIANI
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No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis.
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x MAI ESISTITA UNA TEO DEL GENERE
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non-existent theory* has become the object of denunciations
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c
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Professor Paul Krugman of Princeton and Professor Peter Corning of Stanford,
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x CONTRO I MULINI
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It is a classic example of arguing against a caricature
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x CARICATURA? NO INESISTENZA
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While arguments for cuts in high tax rates have often been made by free-market economists or by conservatives in the American sense, such arguments have also sometimes been made by people who were neither, including John Maynard Keynes3 and Democratic Presidents Woodrow Wilson4 and John F. Kennedy.
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x QUANDO A SINISTRA SI TAGLIAVA
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Barack Obama attacked what he called “the economic philosophy” which “says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.”
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x L ATTACCO DI OBAMA
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the series of tax rate reductions advocated by Secretary of the Treasury Andrew Mellon, and enacted into law by Congress during the decade of the 1920s.
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x IL CASO MELLON
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the actual arguments advocated by Secretary Mellon had nothing to do with a “trickle-down theory.” Mellon pointed out that, under the high income tax rates at the end of the Woodrow Wilson administration in 1921, vast sums of money had been put into tax shelters such as tax-exempt municipal bonds, instead of being invested in the private economy, where this money would create
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x PARADISI FISCSLI
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more output, incomes and jobs.
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c
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What actually followed the cuts in tax rates in the 1920s were rising output, rising employment to produce that output, rising incomes as a result and rising tax revenues for the government because of the rising incomes, even though the tax rates had been lowered.
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x RISULATI RIFORMA MELLON
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people in higher income brackets not only paid a larger total amount of taxes, but a higher percentage of all taxes, after what have been called “tax cuts for the rich.”
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c
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similar results in later years after high tax rates were cut during the John F. Kennedy, Ronald Reagan and George W. Bush administrations.
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x RISULTATI SIMILI
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The facts are unmistakably plain, for those who bother to check the facts. In 1921, when the tax rate on people making over $ 100,000 a year was 73 percent, the federal government collected a little over $ 700 million in income taxes, of which 30 percent was paid by those making over $ 100,000. By 1929, after a series of tax rate reductions had cut the tax rate to 24 percent on those making over $ 100,000, the federal government collected more than a billion dollars in income taxes, of which 65 percent was collected from those making over $ 100,000.10
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x NUMERI
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Unable to get Congress to end what he called “the evil of tax-exempt securities,” 23 Secretary Mellon sought to reduce the incentives for investors to divert their money from productive investments in the economy to putting it into safe havens in these tax shelters:
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x MOTIVAZIONI DI MELLON
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the annual unemployment rate from 1925 through 1928 ranged from a high of 4.2 percent to a low of 1.8 percent.
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x DISOCCUPAZIONE
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The point here is not simply that the weight of evidence is on one side of the argument rather than the other but, more fundamentally, that there was no serious engagement with the arguments actually advanced but instead an evasion of those arguments
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x EVADERE L ARGOMENTO
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arguments of the proponents and opponents of tax rate reductions have been arguments about two fundamentally different things. Proponents of tax rate cuts base their arguments on anticipated changes in behavior by investors in response to reduced income tax rates. Opponents of tax cuts attribute to the proponents a desire to see higher income taxpayers have more after-tax income, so that their prosperity will somehow “trickle down” to others,
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x SI LITIGA SU ARG DIVERSI
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One side is talking about behavioral changes that can change the total output of the economy, while the other side is talking about changing the direction of existing after-tax income flows among people of differing income levels
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c
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Woodrow Wilson, Secretary of the Treasury Carter Glass said of tax rates in 1919 that “the only consequence of any further increase would be to drive possessors of these great incomes more and more to place their wealth in the billions of dollars of wholly exempt securities.”
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x RICONOSCIMENTO INDIRETTO
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It was none other than John Maynard Keynes who said, in 1933, that “taxation may be so high as to defeat its object,” that “given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the Budget.”
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x L ADORATO KEYNES SI SBILANCIA
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In 1962, Democratic President John F. Kennedy, like both Democratic and Republican Presidents and Secretaries of the Treasury in earlier years, pointed out that “it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”
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x L SDORATO KENNEDY SI SBILANCIA
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Total output and economic growth” were italicized words in the text of John F. Kennedy’s address to Congress in January 1963, urging cuts in tax rates.
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c
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Much the same theme was repeated yet again in President Ronald Reagan’s February 1981 address to a joint session of Congress, pointing out that “this is not merely a shift of wealth between different sets of taxpayers.”
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x REAGAN MA È NORMALE
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In 2001, President George W. Bush proposed his tax rate cuts, citing the Kennedy administration and Reagan administration precedents.
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x BUSH
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empirical evidence on what was actually said and done, as well as the actual consequences of tax cuts in four different administrations over a span of more than eighty years have also been largely ignored by those opposed to what they call “tax cuts for the rich.”
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x EVIDENZA IGNORATA
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Confusion between reducing tax rates on individuals and reducing tax revenues received by the government has run through much of these discussions over these many years. Famed historian Arthur M. Schlesinger, Jr., for example, said that although Andrew Mellon advocated balancing the budget and paying off the national debt, he “inconsistently” sought a “reduction of tax rates.”
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x GAFFE DI SCHLESONGER
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According to the textbook These United States by Pulitzer Prize winner Professor Irwin Unger of New York University, Secretary of the Treasury Andrew Mellon, “a rich Pittsburgh industrialist,” persuaded Congress to “reduce income tax rates at the upper levels while leaving those at the bottom untouched.”
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x UNGER GAFFE
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But hard data show that, in fact, both the amount and the proportion of taxes paid by those whose net income was no higher than $ 25,000 went down between 1921 and 1929, while both the amount and the proportion of taxes paid by those whose net incomes were between $ 50,000 and $ 100,000 went up— and the amount and proportion of taxes paid by those whose net incomes were over $ 100,000 went up even more sharply.
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x HARD DATA
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The real effect of tax rate reductions is to make the future prospects of profit look more favorable, leading to more current investments that generate more current economic activity and more jobs.
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x È L INV. BABY
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history textbook,
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The American Nation by Professor John Garraty
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said that Secretary Mellon “opposed lower rates for taxpayers earning less than $ 66,000.” 49
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x ALTRA CONTORSIONE
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best-selling textbook, The American Pageant
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“Mellon’s spare-the-rich policies thus shifted much of the tax burden from the wealthy to the middle-income groups.”
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x ALTRA GAFFE
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When widely recognized scholars have been so cavalier, it is hardly surprising that the media have followed suit. For example, New York Times columnist Tom Wicker called the Reagan administration’s tax cuts “the old Republican ‘trickle-down’ faith.”
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x GAFFE NYT
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Washington Post columnist David S. Broder called these tax cuts “feeding the greed of the rich”
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x GAFFE WP
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Washington Post columnist, Haynes Johnson, characterized the Reagan tax rate cuts as part of the “help-the-rich-first, and let-the-rest-trickle-down philosophies.”
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x ALTRA GAFFE WP
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John Kenneth Galbraith characterized the “trickle-down effect” as parallel to “the horse-and-sparrow metaphor, holding that if the horse is fed enough oats, some will pass through to the road for the sparrows.”
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x GAFFE GALBRICHT
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Responses to later tax cut proposals during the George W. Bush administration included denunciations of “trickle-down” economics from, among others, Arthur M. Schlesinger, Jr., Paul Krugman, and Jonathan Chait.
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x BUSH MALTRATTATO
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Washington Post columnist David S. Broder denounced “the financial bonanza that awaits the wealthiest Americans in the Bush plan.”
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x AMCORA WP
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Implicit in the approach of both academic and media critics of what they call “tax cuts for the rich” and a “trickle-down theory” is a zerosum conception of the economy, where the benefits of some come at the expense of others.
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x ZERO SUM CONCETTO
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Thus, when tax revenues rose in the wake of the tax rate cuts made during the George W. Bush administration, the New York Times reported: “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.” 57 Expectations, of course, are in the eye of the beholder. However surprising the increases in tax revenues may have been to the New York Times, they are exactly what proponents of reducing high tax rates have been expecting,
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x I GAFFEIR SMENTITI
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A globalized economy makes overseas investments a readily available alternative to buying taxexempt bonds domestically.
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x OGGI
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Even if the domestic tax rate is not “high” by historic standards, what matters now is whether it is high compared to tax rates in other countries to which large sums of money can be readily sent electronically.
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x CIÒ CHE CONTA: LA PRESSIONE NEGLI ALTRIO PAESI
