‘Trickle-down’ tax cuts don’t work, study says

SourceWorld Economic Forum
CountryMiddle east

A study claims that taxing the richest less doesn’t strengthen economies and worsens inequality. London-based academics have analysed 50 years of growth, income and employment data covering 18 countries. The study comes as governments are considering raising taxes to repair the economic damage of COVID-19. Billionaires have seen their wealth increase by more than 27% this year to new record highs. Tax cuts for the rich “do not have any significant effect on economic growth and unemployment”, and “lead to higher income inequality”. Those are the central claims of a new study of 18 OECD countries. It draws on economic data from the past half century – a period during which taxes on the richest have fallen widely. The working paper, published by the London School of Economics’ (LSE) International Inequalities Institute, comes at an important moment. Countries including the UK are being urged to use one-off wealth taxes to help repair battered public finances. Argentina has already done so. Some economists argue that “trickle-down” economics, where greater financial headroom at the top can spur broader wealth creation, is real enough – and big tax rises are risky.

Nevertheless, calls for reform are growing, and tackling inequality is high on ...read more...