Trickle Down Tax

I like money. I like making it and I like spending it.

I don’t like taxes. It’s my money, and I should be able to keep it. For that matter, it’s your money, and you should be able to keep it.

But I think government is necessary, and you can’t have government without taxes. So far I think just about everyone is with me. Both communists and libertarians thinks there should be some government, and therefore some level of taxation – it’s just a question of how much of each.

One theory that has been tried for about thirty years now is trickle down taxation. That is, don’t tax the rich much, instead let them use their hard earned money how they see fit, and they will spend it buying stuff and hiring people and building companies. Everyone will benefit because there will be more things sold and more jobs created, and, eventually, more taxes paid.

Has trickle down worked? If you think so, you call it supply side economics. If you don’t, you can call it horse and sparrow (look it up, it’s gross). Trickle down economics is mostly closely associated with Reagan these days, and his chief economist, who first championed it, later thought it didn’t work too well. Let’s assume for the moment that it doesn’t work.

The problem is that it still feels good, at least to me. I mean, it could work, right? Well, it turns out that the rich tend to collect money instead of spending it, and when they do spend it, it’s often not in a way that creates a lot of jobs, and the jobs their spending does create often don’t pay well.

But just because something doesn’t work you don’t necessarily have to throw it away. Is there a way to have low taxes for the rich AND generate good levels of taxation? I think there is, but we would have to incentivize for what we want. Instead of saying, look, you get this and we hope we get this result, we should flip that around and say if we get this result THEN you get this. You don’t say to your kids, hey, you can have a fancy car and all these new video games and these expensive clothes and we’re just going to hope you get good grades in school. If you don’t get good grades, then you know what we’re going to do? Well, we’re going to keep giving you cars and video games and expensive clothes?

Note – a big difference is that when you’re talking about taxes, you’re talking about someone’s money. Something they made and already own. “Letting” someone keep their money is not the same as giving someone something they didn’t have in the first place. I understand that, and I’m not trying to directly equate the two. I’m just making a point about cause and effect and which one we should be incentivizing for.

So I propose that as long as good paying jobs are getting created then the taxation on the rich, and everyone for that matter, stays low. Everyone’s making money and everyone is paying their fair share and government is funded and it can do the things we want it to do. If corporations, and the rich, hoard their cash and hire slowly and cheaply, as they are doing now, then the tax rate on high income and capital gains goes up.

It’s a simple idea, but that doesn’t mean it’s easy. Not easy to measure, not easy to sell politically, not easy to protect from loopholes. But then what law is?