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A new study (abstract and free PDF available) authored by several economists at the IMF (International Monetary Fund) reveal an inverse relation between increases in inequality and GDP growth. In what could also be considered a heavy blow to trickle-down economic theory, data analyses show (page 7) that increases of income share on the fifth quintile actually hurt growth, while increases in any other quintile favours growth with the lowest quintile showing the strongest push.
From the abstract:
We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class.
Original Submission
(Score: 1) by khallow on Saturday June 20 2015, @01:48PM
there is also a large amount that is literally hoarded in assets and offshore accounts
Which are then invested by the banks who keep the funds.
lso, your idea of those investments helping everyone is the same old trickle down theory
Just because the effects of "trickle down" have been exaggerated doesn't mean that they don't exist.
its been pointed out before that progressive tax increases on higher wealth, up to 90%(?) back in the day, allowed for a strong middle class
There has never been a 90% tax on the wealthy due to the many tax loopholes of the time. And what allowed for a strong middle class was both the relative ease of employing people and running businesses (a long running US feature since its beginning) combined with a lack of competition from foreign sources. Keep in mind that for decades, the US was one of the few developed world countries which hadn't been devastated by the Second World War. I think it's foolish to confuse the US's temporary advantages of the time with an imaginary high tax rate on the wealthy.
Such a high tax policy now would be epic folly, studied for centuries. The US has far weaker advantages these days than in the past. I think making the US vastly unprofitable for businesses and such would chase away almost all capital from the country. What would be the point of employing US workers when you lose 90% of what you earn from them? Better to take your chances with China or India.