Where does all the money go?
How does it get distributed and to whom?
Trickle down economics is a term that is commonly used by one side to answer these questions. It was even brought up at the most recent debate and was used throughout the night by Hillary Clinton. However she referred to it as ‘Trumped Up Trickle Down Economics’ which I thought was fitting (Hopefully that is as political as this gets). For those that aren’t aware, the term represents the idea that a top percentage of financial elites are treated more favorably compared to others, allowing the top percent to grow and profit off of the lower class who does not see the same growth.
This term is commonly used in conjunction with the term Laissez- Faire, which refers to the economic policy where government has the least amount of interaction with the economy. For example a Laissez- Faire type of thinking would promote a big business or corporation to act freely without the worry of taxes.
More generally, ‘supply side economics’ is a term used in MACRO which attempts to prove that through less government intervention, the economy gets natural and consistent growth. This term is based upon the idea that supply creates demand.
When all of these ideas and terms are combined and grouped together, you get a subtle look into what is referred to as Reaganomics. Reaganomics is also a presently relevant term with Bernie Sanders take a stark stance to end Reaganomics. At the same time, but on the other side of the spectrum, Donald Trump constantly brings up Reaganomics as a model for which he will base his economics practices off of. Regardless of which side you’re on, what I found most surprising about this term is that contrary to popular belief, it actually still is going on within our economy today.
America does have one of the highest corporate tax rates in the world, however that is not stopping some of the most profitable companies from finding ways to get out of paying. In fact, Bernie Sanders through the Government Accountability Office, called for an investigation into corporate America and found shocking results. One out of every five profitable companies pay zero tax to the country. How could this happen? There’s not one solid answer, but rather many, which in my opinion, says it all about the type of shape that department is in.
Some reasons are that companies could have tax deductions from previously agreed upon deals to help aid losses while others could be sacrificing dwindling assets instead of paying the taxes. To me, the most interesting way companies are getting around paying Uncle Sam is through traveling abroad. When a major US company takes their talents abroad, they do not have to pay the US tax rate and instead settle with, in most cases, a much lower tax rate abroad. They don’t get to bring the profits back with them, which is why US companies currently have around 2 trillion dollars tied up in banks abroad.
Now a days there is much attention drawn to economic reform and it feels like these practice’s days are numbered. At the same time, depending on who is elected, there could be more loopholes opened that at the end of the day, benefit the top elite. It’s a critical time for America, hopefully we make the right decision.