Did Liz Truss Finally Kill the Tax Cut Zombie?

[LetMyPeopleVote]

Supply side economics and tax cuts for the rich do not work in the real world. There is no tax cut fairy and tax cuts to the rich are not magical. Truss tried to adopt typical GOP supply side stupidity and the UK markets rebelled. Hopefully the concept of magical tax cuts are now dead.

Link to tweet

https://www.politico.com/news/magazine/2022/10/21/liz-truss-tax-cut-00062854

For years now, it has been clear that there’s no strong evidence that tax cuts fuel economic growth. But Republican politicians in the United States kept trying it anyway — it was the idea that wouldn’t die. One economist even wrote a book on the matter called “Zombie Economics.”

Liz Truss and her first Chancellor of the Exchequer, Kwasi Kwarteng, embraced the tax cut ideology and advertised it over the summer during the campaign for the leadership contest in the Tory Party. They won — so far so good — and they implemented the policy they had campaigned on. Almost immediately, the British economy was hammered with high interest rates and a plunge in the value of the pound. Truss’ poll numbers nosedived, and she quickly backed down. But this only made those who had voted for her wonder why they should still support her. She lost everyone’s confidence, and the end was clear.

What does this head-spinning series of events mean for American would-be tax cutters? Republican politicians ignore economists who argue against tax cuts, because it’s a policy that no one in the Republican coalition objects to. Even low-income Republican voters who don’t stand to gain much from tax cuts like tax cuts, which helped make George W. Bush the president whose policies most closely matched what the American public, even the poor, wanted. Cutting taxes was also the signature domestic economic accomplishment of the Donald Trump presidency.

At the same time, the British debacle comes at a time when the American right has been edging slowly away from free market orthodoxy. The GOP is embracing a more populist edge and is eager to be seen as a working-class party, criticizing trade and “woke” businesses.

Does Truss’ fate show that big tax cuts, particularly for the rich, just aren’t a credible option anymore? Have the markets finally wised up to what economists have been saying? Would the next American politician proposing big tax cuts meet Truss’ fate?

[LetMyPeopleVote]

1. Fifty Years of Tax Cuts for the Rich Didn't Trickle Down, Study Says

There is no tax cut fairy and tax cuts for the rich do not work in the real world

Link to tweet

Tax cuts for rich people breed inequality without providing much of a boon to anyone else, according to a study of the advanced world that could add to the case for the wealthy to bear more of the cost of the coronavirus pandemic.

The paper, by David Hope of the London School of Economics and Julian Limberg of King’s College London, found that such measures over the last 50 years only really benefited the individuals who were directly affected, and did little to promote jobs or growth.

“Policy makers shouldn’t worry that raising taxes on the rich to fund the financial costs of the pandemic will harm their economies,” Hope said in an interview....

The authors applied an analysis amalgamating a range of levies on income, capital and assets in 18 OECD countries, including the U.S. and U.K., over the past half century.

Their findings published Wednesday counter arguments, often made in the U.S., that policies which appear to disproportionately aid richer individuals eventually feed through to the rest of the economy. The timespan of the paper ends in 2015, but Hope says such an analysis would also apply to President Donald Trump’s tax cut enacted in 2017.

“Our research suggests such policies don’t deliver the sort of trickle-down effects that proponents have claimed,” Hope said.

[Hermit-The-Prog]

2. Dang paywall. link to article ...

https://www.bloomberg.com/news/articles/2020-12-16/fifty-years-of-tax-cuts-for-rich-didn-t-trickle-down-study-says

Here's a Thom Hartmann thread about trickle down, from July:
https://threadreaderapp.com/thread/1543463394996408321

[LetMyPeopleVote]

8. 'Trickle-down' tax cuts make the rich richer but are of no value to overall economy, study finds

Here is an article from the Washington Post

Link to tweet

https://www.washingtonpost.com/business/2020/12/23/tax-cuts-rich-trickle-down/

But, just as many economists predicted, slashing individual, corporate and estate tax rates was mostly a windfall for big corporations and wealthy Americans. The Tax Cuts and Jobs Act did not pay for itself, failed to stimulate long-term growth and did not lead to sustained business investments.

According to one of the most comprehensive studies to date on tax cuts for the rich, this should come as no surprise. A London School of Economics report by David Hope and Julian Limberg examined five decades of tax cuts in 18 wealthy nations and found they consistently benefited the wealthy but had no meaningful effect on unemployment or economic growth........

First, the tax cuts succeeded at putting more money in the pockets of the rich. The share of national income flowing to the top 1 percent increased by about 0.8 percentage points. (For comparison, in the United States the bottom 10 percent of earners capture only 1.8 percent of the country’s income).

But they had no effect on economic growth or employment. Though those quantities fluctuated slightly after the major tax cuts that were studied, the effect was statistically indistinguishable from zero. The “rocket fuel” so often promised by supporters of these tax cuts? It fizzles out time and time again.

“In the last decade, especially with the pioneering work of Thomas Piketty and his co-authors, there has been a growing consensus that tax cuts for the rich lead to higher income inequality,” Hope and Limberg said. Piketty, a French economist, wrote “Capital in the Twenty-First Century,” a book on the growth of inequality in rich nations......

Given the historically low tax burdens on the wealthy in the United States, their ability to pay for higher taxes has probably never been better.

[Hermit-The-Prog]

11. Thanks for the link! Trickle-down transfers wealth to those who already have too much power.

[malaise]

3. We can hope

Fuck trickle down economics

[LetMyPeopleVote]

14. Will Rogers, November 1932. Just three years into the Great Depression.

Link to tweet

[malaise]

15. He was right

[gratuitous]

4. More money upwardly distributed to the wealthiest can never fail

It can only be failed by lack of faith and inadequate vision. We'll get it right next time. And if that doesn't work, the time after that.

[larrymoeT]

5. conservatives will ignore this

They’re not smart enough to get the hint.

[apnu]

6. Nope, its not dead. 50 years in the US and going strong.

Supply-Side voodoo has been a thing in the US for
50 years. Americans are used to it and continue to elect conservatives who run on it and nothing else.

The UK’s relationship with its economy is very different from the US. Truss failed because she tried US-style voodoo instead of the English voodoo. America is bold and loud, the UK likes a slower subtile voodoo.

But the goals of the Tories and Republicans are the same and have been the same for generations. The issue here is how its sold to the gullible public.

[scarletlib]

7. No. Bad ideas always find a way back.

[moondust]

9. Probably not.

Not as long as there are people in politics who seem to think the shiny tax cut thing is what made Thatcher and Reagan popular as well as others who will gladly curry favor with the very wealthy as a way to gain entry into the "elite" club themselves.

[GoCubsGo]

10. Maybe in the UK, but not in the US.

The majority of those in the US who still buy into the "trickle down" bullshit aren't paying attention to what's going on in the UK. And, those who are tend to be too clueless to make the connection that it works the same way here, too.

[LetMyPeopleVote]

12. Trickle Down Economics just failed in the UK

Link to tweet

[LetMyPeopleVote]

13. This aged well

Link to tweet

[LetMyPeopleVote]

16. GOP wants to push to extend Trump tax cuts after midterm elections

The GOP want to cut Social Security and Medicare in order to be able to expend The TFG tax cuts. A vote for a republican is a vote to cut social security and to extend the TFG tax cuts

Link to tweet

https://www.washingtonpost.com/us-policy/2022/10/17/republicans-tax-trump-biden/

Republicans plan to push to extend key parts of President Donald Trump’s tax cuts if they take control of Congress in this fall’s elections, aiming to force President Biden to codify trillions of dollars worth of lower taxes touted by his predecessor.

With Democrats likely to lose control of the House of Representatives and possibly the Senate, Republicans are preparing to advance legislation that would make permanent the GOP’s 2017 changes to the tax rates paid by individuals. Republican officials will also push for scrapping some of the law’s specific tax increases on corporations that were designed to offset the cost of their enormous overall cut to the corporate tax rate.

Many economists say the GOP’s plans to expand the tax cuts flies against their promises to fight inflation and reduce the federal deficit, which have emerged as central themes of their 2022 midterm campaign rhetoric. Tax cuts boost inflation just like new spending, because they increase economic demand and throw it out of balance with supply. But Republicans say they believe these efforts would put Biden in a political bind, requiring him to choose between vetoing the tax cuts — giving the GOP an attack line in the 2024 presidential election — or allowing Republicans to win on one of their central legislative agenda items.,,,,

“While President Biden and congressional Democrats are fighting to make middle class families the heart of our economy. … Republicans want to sell those families out to rich special interests and by doubling down on their 2017 tax giveaway to the ultrawealthy and corporations,” White House spokesman Andrew Bates said.

The fight over Trump’s tax cuts could become a key feature of divided government should Republicans take control of one or both branches of Congress. Congressional lawmakers and the White House will have to come to agreements over funding the government, averting a breach of the debt ceiling and other spending bills — negotiations that will give the GOP an opportunity to press their policy demands. Democrats used control of the House after the 2018 midterm elections to push Trump into accepting many of their priorities, such as expanded domestic spending and paid leave for federal workers......

But Republicans say they are committed to extending the cuts. “The Tax Cuts and Jobs Act has been providing real, substantial relief to families and businesses,” said Rep. Jason T. Smith (R-Mo.), the ranking member of the House Budget Committee, in a statement. “We need to build on that success by making permanent those policies that are supporting families and workers while looking at what more needs to be done to the tax code.”