Saturday, September 29, 2012

Thomas Sowell and the Political Proposition of “Trickle Down”

Thomas Sowell recently published a 14 page pamphlet: “Trickle Down” Theory and “Tax Cuts for the Rich”.

Thomas Sowell has pointed out on many occasions that no such economic theory, known as "trickle down", exists. You read that correctly, in all of economic literature no such theory exists. Sowell is correct, no such theory known as “trickle down” exists within the realm of economics. That "trickle down" and its companion "tax cuts for the rich" are merely notional political concepts and such misinterpretation goes all the way back to the 1920's.

Sowell has expressed the concepts which appear in the pamphlet many times, but this time around he expands upon the argument in that he clearly delineates between the change in behavior associated with taxes reductions and the mistaken conclusion of change in income flows to a particular class.

Also, left out of the discussion by many pundits, talking heads and commentators is Andrew Mellon. Mellon merely showed the paradox between lower tax rates and higher government revenue. Mellon’s book Taxation: The People’s Business is in fact a discussion of the change in behavior regarding taxes. (1)

However, Mellon has been vilified by many mainstream historians based on notional propositions without looking at the hard data. Mellon was correct and these particular historians are wrong. Maybe particular historians enjoy vilifying Mellon as he was FDR’s favorite target of: bring government powers to bear against an individual citizen due to FDR’s own personal notional vendetta.(2)

Link to Sowell’s recent publication appears below:


(1) Andrew W. Mellon, Taxation: The People’s Business, New York, The Macmillan Company, 1924.

(2) Burton Folsom Jr., New Deal or Raw Deal, NewYork, Simon and Schuster, 2008, pages 159-162.


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