Thread by @fsaraceno

Today’s #nusp2018 is on #trickledown. Does it work? Stay tuned!

Group 1 argues it does. First point, trickledown dose not redistribute, it works because it creates extra resources

Group 1 starts from the Laffer curve. Then they mie to investment and job creation, i.e wages and revenues, then the multiplier kicks in

Second channel: technology. Investment brings productivity increases and eventually long run growth. Both benefit all income brackets

Third channel: trade/competitiveness lower taxes on companies reduce costs , boost exports, improve income for all.

The bottom line of group 1 productivity increase, the ultimate source of growth, is boosted by tax cuts to the rich and corporations

Question from the public: how can we make sure that the tax cut is invested and not saved? Answer: studies show negative correlation between investment and tax rates

Question, what about the low correlation between ax rates and growth? The group answers focusing on corporate tax rates.

Now to group 2, arguing against trickledown as an engine for growth

Group 2 starts from propensity to consume, lower for low income individuals

The wealthy do not invest but put savings into tax havens.

IMF study:?incone stare of bottom 20% is positively (not negatively) correlated with growth

So extra savings for the rich do not go towards investment

Case study: Kansas. Lower tax rates did not lead to higher growth

They actually go mostly into stock buybacks (Trump tax rate drop)

On top of everything, the laffer curve does not work, so debt will increase and will have to be reduced by cutting services for low income households

What would work better?

A) cut taxes to the middle class; this increases propensity to consume