With "trickle-down economics" on the tongue of Americans this year, I wanted to do some research. The prevailing opinion is "trickle-down economics doesn't work." I can find many resources which defend this position. However, I am having trouble finding resources which suggest trickle-down/supply-side economics does indeed work which have not been refuted by history.

Do we have any examples where trickle-down/supply-side economics has been applied, and has been considered a success? Ideally, I'm looking for examples of events which occurred long enough ago to provide it the opportunity to fail, but in which it is generally agreed it succeeded.

  • $\begingroup$ The people arguing that trickle-down economics doesn't work almost certainly do not believe that a 100% corporate tax rate would be optimal for society (such a tax rate would kill virtually all economic activity). So those people implicitly accept that we should reduce corporate taxes below the maximum possible level to some extent. We are really arguing, therefore, about how much taxes should be reduced, rather than about the matter of principle of whether they should be reduced at all. With this in mind, can you provide a definition of what you mean by trickle-down economics? $\endgroup$ – Ubiquitous Jan 12 '18 at 19:32
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    $\begingroup$ @Ubiquitous I'm boiling it down to the theory that changes which lower the corporate tax rate (or otherwise make running a business more profitable) improve the quality of life (typically measured in income) of the citizens more so than directly lowering their tax rate would. Your comment does point out that, if no examples are found, my takeaway should be "There is theoretically a point where trickle-down economics must work, but we have never seen such a rate in practice." $\endgroup$ – Cort Ammon Jan 12 '18 at 19:55
  • $\begingroup$ Nobody who favours “trickle down” policies would call it that. I believe that’s how the Democrats labelled Reagan’s tax cuts (although variants of the idea are much older). They might label it “supply side reform”, but that phrasing is also old school. But if you want want examples, there was a wave of tax cuts across the developed countries since the early 1980s. $\endgroup$ – Brian Romanchuk Jan 14 '18 at 0:11
  • $\begingroup$ @BrianRomanchuk I don't suppose you could expand that into an answer? What I can find on the 1980's doesn't paint a rosy picture, but an answer which points out something I missed is exactly the kind of thing I'm looking for. $\endgroup$ – Cort Ammon Jan 14 '18 at 4:22
  • $\begingroup$ The Reagan tax cuts would probably be a classic example, but there were others (JFK, Bush II), Thatcher, and elsewhere. The problem is that “worked” is too broad - what do you want to know? GDP growth? Inequality? Tax revenue? Each of those effects have been extensively studied. I am a monetary policy/government finance person, so I have no idea of what the literature is. If you do not get an answer, try re-phrasing it (use “tax cut” instead of “trickle down”, and ask about one aspect, and you have a better chance of getting a response. $\endgroup$ – Brian Romanchuk Jan 15 '18 at 12:29

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