A 'Trickle Up' Theory

I want to suggest a theory for your consideration.  I welcome comments and criticism.  Even feel free to (gently) suggest we erase my thoughts as drivel not requiring serious consideration.  So, to start, let’s discuss my theory through a lens that recognizes us as a democratic community (yes, the small “d” is deliberate) simply searching for a better path forward for our embattled country.  

For context consider recent history that accounts (in my view) for much of our current political and financial morass.  Three Presidents have sold trickle down economics to justify tax cuts for the wealthy.  Trickle down theory postulates that lowering taxes on the wealthiest citizens and the largest corporations will stimulate business investment.  In turn investment will create jobs and economic growth.

(It should be noted that my take on trickle down economics does not attempt to capture the many nuances that, if cataloged here, would make any discussion unwieldy.  Also, be aware that defenders of trickle down economics would put a significantly different spin on the data.)

Trickle Down No. 1/Ronald Reagan

Trickle down economics, also known as Reaganomics, was not original to President Reagan.  He was first elected to the White House largely on his promise to correct the economic challenges that plagued his predecessor, Jimmy Carter.  Hence, Reagan supporters claimed Reaganomics validated trickle-down economics.  According to Encyclopedia Britannica “there is no evidence that tax cuts for the wealthy resulted in benefits to the lower economic classes. However, there is ample evidence that such tax cuts increased economic inequality; the gap between rich and poor grew at a rate unseen since 1920.”

To justify the tax cuts, Reagan cut social service spending in favor of increasing defense spending, though we were not at war with anyone at that time.  Reagan pointed to the Cold War and our need to counter Soviet aggression as justification.  In actuality the gross federal debt roughly tripled during Reagan's presidency, rising from just under $1 trillion to nearly $2.9 trillion. 

Trickle Down No. 2/George W Bush

Bush proposed a $1.6 trillion tax-cut bill in February 2001. A compromise measure worth $1.35 billion was passed by Congress in June.  

Then, in 2003, President Bush signed into law a tax plan designed to reduce taxes and stimulate economic growth. The bill cut taxes by another $350 billion over 10 years. The act reduced the long-term individual income tax rate on capital gains to 15%, and it significantly reduced the amount of tax paid by investors on dividends and capital gains. 

A statement signed by 450 economists, including 10 Nobel Prize Laureates, opposed the bill.  Two economists called the tax cuts a reverse government redistribution of wealth.  The economist Paul Krugman claimed that the great bulk of the tax cuts would benefit the top 2% of the population and a full 42% of the tax cuts would benefit people making more than $300,000. More than 50 million taxpayers, he claimed, would receive no tax cut at all. 

Collectively, the Bush tax cuts reduced federal individual tax rates to their lowest level since World War II, and government revenue as a share of gross domestic product declined from 20.9% in 2000 to 16.3% in 2004.  

The cuts had the cumulative effect of adding to the debt without significantly boosting growth. The top 1% of households gained an after-tax income increase of 6.7%, while those in the lowest fifth made gains of just 1%.15

Research shows no evidence that tax cuts have any impact on the spending habits of upper-income taxpayers. The Bush tax cuts would only increase growth enough to make up 10% of their long-run cost. Maintaining the cuts had been estimated to cost $4.6 trillion from 2012 to 2021.

Trickle Down Nos. 3 & 4/ Donald Trump, 45 & 47

The Tax Cuts and Jobs Act (TCJA), signed into law by President Donald Trump on December 22, 2017, introduced significant changes to the federal U.S. tax code. Its primary goals were to reduce taxes for many American individuals, households, and corporations, reduce tax paperwork, and ease record keeping.

The TCJA impacted households and individuals by raising the standard deduction, child tax credit, and estate tax, lowering marginal tax rates, setting caps on deductions for mortgage interest and state and local taxes, and other provisions.

But, Trump’s 2017 tax law was skewed to the rich.  Households with incomes in the top 1 percent received an average tax cut of more than $60,000 in 2025, compared to an average tax cut of less than $500 for households in the bottom 60 percent, according to the Tax Policy Center (TPC).  As a share of after-tax income, tax cuts at the top — for both households in the top 1 percent and the top 5 percent — were more than triple the total value of the tax cuts received for people with incomes in the bottom 60 percent.

The bill was expensive and eroded the U.S. revenue base. The Congressional Budget Office (CBO) estimated in 2018 that the 2017 law would cost $1.9 trillion over ten years.  The extension of the bill in 2025 (the so-called One Big Beautiful Bill or OBBB) is estimated, since they are now permanent, to add another roughly $400 billion a year to the deficit beginning in 2027. 

There simply will not be enough revenue after the Bush and Trump tax cuts to meet the nation’s investment needs and our commitments to Social Security and health coverage.   Like the Bush tax cuts before it, the 2017 Trump tax cut and the 2025 extension will be  a trickle-down failure.

Three Republican Tax Cuts,

Three Commonalities

1. Each tax cut, billed as trickle down economics, has been proven to simply be a further transfer of wealth from the 98% to the top earners and the largest corporations. 

2. Each succeeding tax cut accelerated the concentration of the nation’s wealth into fewer hands and has largely gutted the middle class. 

3. Each tax cut has also been accompanied by a surge in spending directed to the Department of Defense.  Reagan blamed the Soviet Union and the Cold War for his surge in defense spending  Bush blamed the wars in Afghanistan and Iraq.  Trump has initiated wars with Venezuela and Iran.  Under the Reagan, Bush Two and Trump presidencies, tax cuts and dramatic increases in Pentagon budgets have also led to dramatic increases in the national debt.

Trickle Down Economics?

The meaning of the phrase only has substance when it is turned on its head.  In truth, “down” is actually “up.”  Who benefits the most from the tax cuts?  The wealthiest individuals and the largest corporations.  Tax savings do not accumulate primarily with the bottom 98 percent of taxpayers—the citizens that would most benefit from tax relief.  

In fact, at least 88 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite enjoying substantial pretax profits in the U.S.  Among the 88:  3M, Citigroup, CVS, Duke Energy, Honeywell, Southwest Airlines, Tesla, United Airlines and Walt Disney.  

Many among the 88 paid billions in taxes to other countries around the world in 2025.  For example, overall, the three largest American oil and gas “supermajors” — Chevron, ConocoPhillips, and Exxon — paid an average effective tax rate of just 6% on their combined $23 billion in domestic profits for 2025.  However, Exxon paid five times more in taxes to the United Arab Emirates than it did to the U.S. Meanwhile Chevron paid around three times as much in tax each to Kazakhstan, Nigeria, and Saudi Arabia as compared to what it paid in the U.S.

So, tax savings are actually trickling “up”, not “down”.  And it's not really a trickle …think instead of a fire hose, not a garden hose.  Old adages are not always trite.  Sometimes, they are agonizingly appropriate.  The rich truly do get richer while the rest of us suffer.  

A Better Trickle Down Concept

It is really pretty simple. Tax the top 2% and the largest corporations and allow part of those taxes to trickle down to the bottom half of the population.  Those monies would truly be spent on necessities (hopefully creating a better lifestyle), not on a third or fourth home in some exotic part of the world, not on a third or fourth exotic car, not on private jets, not on endless vacations, but on better healthcare, more stable housing, three meals a day for the kids.

Notice, I did say just part of the recovered taxes should go to the people who most need it.  The other portion would go to steadily paying down our national debt.  We can get away from paying over $1 trillion a year in interest on our debt.  We can gradually free our grandkids of the crushing national debt that will be their legacy if we do not reverse our country’s current budgetary trajectory.

If this all feels overwhelming, it is understandable.  If you question what you can do about it, that is understandable.  BUT we all have our voice and our vote.

Let’s begin by electing Roy Cooper and Jamie Ager.  Let’s elect Anita Earls to the NC Supreme Court.  Let’s elect Toby Hampson, John Arrowood and Christine Walczyk to the NC Appellate Court.

Let’s elect Lynne Russo and Doyle Brown to District 113 and Senate 48.  Let’s elect Mary Ellen Kustin and Reid Barwick to SB.  Let’s elect the Democrats running for HVL offices.

Weekend Joe