41 Finance Monthly. Economics 101 argue not to its full extent and in its purest form. In reality, however, one thing that becomes very apparent when this process is applied is that economic inequality increases. Suppose we use President Reagan’s and President Bush’s cuts as examples. According to trickle-down economics, Reagan’s and Bush’s tax cuts should have helped those at all income levels. But the opposite result took place: income inequality worsened. Between the years 1979 and 2005, the bottom fifth saw a 6% rise in after-tax household income. While this on its own seems great, it’s important to note that the top fifth experienced an 80% increase in after-tax household income. The income of the top 1% tripled, showing that prosperity was trickling up rather than down. Why does economic inequality happen as a result of trickle-down economics? In most cases of its implementation, the rich get much richer because they don’t want to invest their excess wealth. As a result, money is often stored in off-shore accounts to further preserve their new wealth. Furthermore, tax cuts for In Conclusion The trickle-down economics system does have its merits; however, in most practical examples, the successes are somewhat clouded due to the use of other measures to prop up trickle-down economics as a system. Therefore, it seems that as yet, we haven’t seen the theory work on its own, and with the recent failure of the Liz Truss & Kwasi Kwarteng mini-budget in the UK in October of 2022, it seems that this may continue until a severe shift in economics and public opinion can happen. George Bush Picture by: Eric Draper the richest in society don’t often translate to increased consumer spending, rates of employment, and government revenues in the long term. Inequality rises, and examples of the opposite system seem to work better with tax cuts for middle- and lowerincome earners driving the economy through the trickle-up phenomenon. “REAGAN’S AND BUSH’S TAX CUTS SHOULD HAVE HELPED THOSE AT ALL INCOME LEVELS. BUT THE OPPOSITE RESULT TOOK PLACE: INCOME INEQUALITY WORSENED.”
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