Abstract

ROBERTS, Michael. The trickle-down economics. Rev.econ.inst. [online]. 2023, vol.25, n.48, pp.3-11.  Epub Mar 17, 2023. ISSN 0124-5996.  https://doi.org/10.18601/01245996.v25n48.02.

This paper criticizes the supply-side economic policy promoted by the UK government under Prime Minister Liz Truss. According to the conventional interpretation, the stagnation and productivity crisis in the UK economy is due to the excessive tax burden on large corporations and the tax burden on the richest 1%. If these tax liabilities were reduced, it would increase the profitability of investment, demand and the rate of growth. This would translate into better incomes and higher levels of employment. This story is based on the Laffer curve and associated with the "trickle down" hypothesis, falsified by empirical evidence. Tax reductions for the richest people worsen the distribution of income, and do not raise income or employment. The cause and effect is from profits to investment and growth; not from spending to profits and growth.

JEL: P24, P34, 935

Keywords : trickle; tax bases; tax burden.

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