Prosperous AND Shared Economy

How Trickle-Down (Tax Cuts for the Rich)
Does Not Work

Expanding the economy is about speeding up money in the economy.  The faster money is spent and spent again and so on, the more times money cycles through the economy per year and the larger the economy.  Conversely, slowing money in the economy shrinks the economy.

Already the rich and corporate America have several trillion dollars that they could invest and speed up the economy at any time.  But they have not and will not because if you have a lot of money, you do not want to lose it!  You become risk-averse.  You can wait until you know your investment has the highest chance of working.  You may look at dozens to hundreds of investment possibilities before deciding on one.  You have the luxury of time to be cautious.  You invest slowly.

If you have a lot of money, you also tend not to have immediate needs.  You have the luxury of time to shop around, delay purchasing, or even decide not to purchase something.  You spend slowly.

If you have a lot of money and you get a tax cut, you would tend to invest and spend it slowly which slows and shrinks the economy.  The wealthy and big business are not bad because they spend and invest slowly, this behavior is just human nature.

Their investments and spending are important to the economy, but their investments are pulled into the economy when their business plans are expected to succeed.  Usually, they execute their investments when it is expected that there will be customers with money.  Tax cuts for the wealthy create few customers with money and therefore do not trigger investment to speed up and expand the economy.  Instead, tax cuts for the wealthy slow money and shrink the economy.  These cuts ultimately hurt everyone including the wealthy!

Another problem for tax cuts triggering business investment is that hiring and purchases are expenses that offset current or future profitThe tax rate is ultimately 0.  A lower business income tax rate is frequently a motive to extract money from the business and not invest the money back into the business.  Corporations are likely to pay out more in dividends or buy back stock instead of reinvesting.

If we want the wealthy and big business to invest the trillions they already could, we simply need to create more customers with money.  Our BPIs and Valuing All Workers do just that!


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