The trickle-down theory of economics, also known as the horse and sparrow theory is an economic solution that favors the ideology of cutting taxes on businesses and the elite social class. The purpose is to empower them to invest more in business ventures, thus stimulating the business investment for a nation that in the longer term can benefit the entire society and economic growth.
This is the same theory that Donald Trump also implemented, and reports and extensive studies suggest that the economic condition of the US had gone bad by 2019 only, even before the pandemic had hit the world.
Mitch McConnell, the Senate Majority leader of the Republicans, like many other rightists in the US, believes that Trump’s economic policies and tax-cut implementations on the upper 1% boosted business investment and contributed to the increased wage rates that eventually benefited the low-income laborer. However, the point to remember is that individual American states started increasing their minimum wage rates after years of stagnation and it had nothing to do with Trump’s policies.
Increase in Wealth Inequality
The recent research paper from the London School of Economics also suggests the same that whenever taxes are reduced on businesses and trickle-down economics comes into play, the only people who really benefit from it are the rich ones. The economic condition of the poor working class either remains the same or gets worse.
In the UK, pressure from the left-wing is increasing to cut on trickle-down economics.
The left-wing of the political spectrum understand that the rightist trickle-down theory is doing nothing, in fact, it is just adding more burden on an already burdened economy since the coronavirus pandemic. Pressure on Rishi Sunak, Chancellor of the Exchequer is increasing from the left wing to start increasing the taxes on businesses and the elites now, as it seems to be the only way to come out of the global pandemic crisis that has affected the UK’s economy too.
In 2012, George Osborne, the then Chancellor of the Exchequer had reduced the tax rate from 50p to 45p and later started hailing that the highest-earning British population benefited so much from this action that they were able to generate extra income and paid around £8 billion extra tax to the Exchequer.
Now, the truth of the matter was that all the tax payments were held one year before Osborne’s policy was implemented, and then a collective tax was paid in the following year on the lower rates when the policy was in effect. So, actually, his policy did not have any positive effects as he had tried to make people believe. It only benefitted those higher-earning Britishers as they got to pay their taxes at a lower rate one year later and by avoiding those same taxes at a higher rate in the year before the policy got implemented.
The hospitality sector faced the major brunt of the pandemic.
The overall economic condition in the UK now is bad as the unemployment rate increased dramatically during the pandemic. Experts and leftists believe that the only solution to overcome this crisis is to increase the tax rates now.
I’m Ava Paul, an experienced news website author with a special focus on the entertainment section. Over the past five years, I have worked in various positions of media and communication at World Stock Market. My experience has given me extensive knowledge in writing, editing, researching and reporting on stories related to the entertainment industry.
