Give corporations and the rich tax breaks, offer financial benefits to large businesses and entrepreneurs, and unleash a wave of innovation and economic growth. Jobs will be created, incomes will rise, and everybody will benefit. In essence, this is what proponents of the trickle-down theory argue, a theory that Joe Biden now wants to turn into a tale of history.
The idea that tax cuts for the rich would benefit everyone in the economy, including the poorer income brackets, first came into vogue in the 1970s. Since then, average incomes have flatlined while most of the capital gains from growth have filled the pockets of those sitting at the very top of the income distribution.
Joe Biden now wants to reverse this trend in calling on the top 1% income earners in the US (everyone with an annual income of $400,000 or more). In doing so, he hopes to finance his American Families Plan, which focuses on areas such as infrastructure, education and childcare. In his address to congress a few weeks ago Biden’s message was clear: “Trickle down has never worked” and “it’s time to grow the economy from the bottom and the middle out”.
Biden clearly speaks out against adding further tax burden to the middle class and instead wants to close loopholes for the rich to stop them from evading taxes. He argues: “A recent study shows that 55 of the nation’s biggest corporations paid zero federal tax last year. Those 55 corporations made in excess of $40 billion in profit.“ According to Biden, reforms to corporate taxes are necessary to get businesses to contribute their fair share to society, a political attitude that is also reflected in his administration’s recent efforts to establish a global minimum corporate tax. The hope: make it harder for companies to shift profits off seas and evade taxes through tax havens. “We’re going to get rid of the loopholes that allow Americans who make more than a million dollars a year to pay a lower tax rate on their capital gains than Americans who receive a paycheck. “
The US president’s address can be interpreted as another statute of the end of the era of ‘Reaganomics‘ and beginning of what some have come to call ‘Bidenomics’.