Trickle-Down Economics

TRICKLE-DOWN ECONOMICS

TRICKLE-DOWN ECONOMICS. A derogatory term applied to Reaganomics, or supply-side economics, trickle-down economics is the theory that tax cuts for the wealthy merely "trickled down" to the bottom groups and that the rich benefited at the expense of the economy. Similar criticisms were raised about the supply-side tax cuts enacted by Treasury Secretary Andrew Mellon in 1921 but not for those made by John Kennedy in the 1960s. Supply-side cuts involve cutting taxes across the board but most dramatically for those in the top tax brackets. The rationale was that those who paid the most taxes would then be able to reinvest their tax "savings." Thus, supporters have countered the phrase "trickle-down" with the one coined by John Kennedy: "a rising tide lifts all boats."

BIBLIOGRAPHY

Brookes, Warren. The Economy in Mind. New York: Universe Books, 1982.

Brownlee, W. Elliot. Federal Taxation in America: A Short History. Washington, D.C.: Woodrow Wilson Center Press, 1996.

Canto, Victor A., Douglas H. Joines, and Arthur B. Laffer, eds. Foundations of Supply Side Economics: Theory and Evidence. New York: Academic Press, 1983.

Schweikart, Larry. The Entrepreneurial Adventure: A History of Business in the United States. Ft. Worth, Tex.: Harcourt, 2000.

Larry Schweikart

See also Laissez-Faire ; Reaganomics ; Supply-Side Economics ; Taxation .