A trickle down economy refers to a taxation system, which proposes that tax breaks are essential for the rich in order to enhance investment and boost economic growth within the economy. This concept is achieved by investing money in large companies and giving them tax reliefs in order to provide more opportunities for the poor, thus, stimulating the economy. As a result, the rich will be encouraged to put more efforts in investments, thus, yielding more opportunities. Similarly, the poor will put considerable efforts into their skills and knowledge to attain wealth, which they can use for investment. This culture definitely will create a drastic shift for the country into a globally competitive economy. Considering this concept, the issues of punitive taxes designed for the rich will be eliminated and, thus, people will have the flexibility and convenience of investing in the country. For the foreign investors this policy will be attractive because of its lucrative opportunities enticing many investors into the country (Blink 71). Essentially, if the benefits of a trickle-down economy undergo evaluation, numerous benefits will be derived, unlike in economy that exhibits a progressive taxation system.
The economic standards of our country necessitate a trickle-down economy. This is mainly due to the harsh economic times experienced on a global scale, which demand refinement of the nature of our economy. Through the efforts incorporated to alter the course of the economy, the trickle-down theory would provide the best path. Based on the need to reduce the poverty level and enhance the wealth among the rich, this nature of economy would effectively serve the purpose. Additionally, the tax breaks offered by the country to the rich would act as an incentive for people to work hard for wealth rather than attempting to create further opportunities for wealth hoarding. This notion arises from the fact that wealth is not viewed as a crime by the holders. The idea underlying this notion is that wealth holders will not be looking for means of tax evasion due to punitive taxes, but rather means of enhancing wealth to earn more tax breaks (Henderson 178). Considering these potential benefits, it is necessary to adopt the trickle-down economy.
Benefits of a trickle-down economy
Initially, the nature of the trickle down economy would enable both the local and international investors to invest in large companies and organizations. The idea of tax breaks would enhance this fact, which is lucrative to the investors. The industries and organizations developed would offer good chances for the locals to get employment opportunities. As a result, the unemployment rates would decline drastically within the country. The fact that the taxation policy would dictate the need for hard work for people would enhance this concept since the government does not press them (Engdah l 95). Considering the fact that most people would engage in various economic activities that enhance the growth of the economy, multiple chances would arise. Based on this notion, the crime level and various disasters experienced due to lack of employment would decline. The realization of this scenario is bound to the improvement in the standards of living among the people.
The standards of a trickle-down economy will boost the standards of living of the people within the country. Based on this idea, the population would achieve the best standards of living in a peaceful environment that promotes co-existence. As a result, the population generation would exhibit knowledgeable and skillful personnel. This is because most parents would be able to provide their offspring with the best education within their country. Consequently, the generation productivity would be highly rated from time to time. Meanwhile, the country’s economy would significantly grow and be able to cushion itself from the hard economic times that are prevalent due to economic cycles. In addition, the trickle-down economy will expand the economy not only in the local country, but also on a global scale. As a result, this will yield growth in the income per capita due to the growth in the Gross National Product (GNP) (Krugman 154). In this regard, the productivity and general performance of the economy would significantly grow until it reaches the optimum level.
A trickle-down economy improves the level of savings that is later directed to investments. Since this form of economy is not punitive to the investors, most investors would earn money and save in order to direct it to viable investments within the country. Both the rich and the poor would be able to save and thus the investment opportunities created would surpass the population size improving the standards of employee benefits and remunerations. In this regard, investors would be able to provide the best working conditions in order to attract, recruit, retain and get optimum contribution of employees (Henderson 209). As a result, the country’s economy would favor the citizens and improve the overall contribution of each individual. Based on the degree of the activeness of the population, the country would experience a peaceful environment suitable for further investments. In this case, the political instability that usually is the result of hard economic conditions for the citizens would significantly decline. Therefore, the investment projects would yield maximum returns and flourish the economy.
Since a trickle-down economy leads to the growth of investment in the country, competition would definitely emerge among the investors. This form of competition would lead to a market similar to a perfect competitive market due to multiple investors in the same industries. Consequently, the consumers of various products and services within the country would experience the best treatment and offers from the competing investors. This fact would enable the consumers to conveniently obtain and enjoy the services offered by the investors. Moreover, the standards of living would considerably improve because of various services and products provided by the investors to the consumers. Meanwhile, the consumers would receive the best quality and high quantity of goods and services (Krugman 298).
Concerning taxation, being one of the leading contributors to the government’s revenue, a trickle-down economy would provide full compliance of all parties to the remittance policies. Since this form of economy is not punitive to the taxpayers, both the rich and the poor would have the flexibility to remit the allocated taxes to the authorities. As a result, the government would be able to reduce the level of tax evasion and tax avoidance. These major concerns would enable the country to contribute towards investment, leading to the growth of opportunities for the citizens. Similarly, with the efficiency available to the free-flow of funds within the economy, the players in the market will derive major benefits.
With the simplicity and flexibility associated with the trickle-down economy, it is convenient for the taxpayers to remit taxes. Both the large investors and the employees would easily comply with the taxation policies and thus the government would spend little on the process while achieving the best out of its efforts. Additionally, since the organization would be remitting its employees taxes, limited funds would not be exposed to the taxation prevalent in other forms of economy. Meanwhile, the government would be able to impart the need for hard work by the poor within the country in order to minimize the level of taxes exposed to them and accumulate wealth for investment.
The trickle-down economy would be an attractive opportunity for major investments in the country. Some of the investors would develop large companies and organizations within the country improving the country’s industrialization level. Based on the myriad forms of investment, the economic standards of the country would go up yielding more respect and loyalty from the foreign countries. As a result, the country’s exports would be highly regarded in the international trade, boosting the performance of the country’s produce. Similarly, the country would be able to experience competition for the supply of goods and services from the globally renowned production industries. This fact will enable the country to dictate the prices of the export based on their capabilities and the nature of the relationship they exhibit with the trading country. Additionally, the country will reap the benefits of offers, bonuses and discounts (186).
Within a trickle-down economy, the government would have high revenues from the taxes collected from the investors. These taxes will enhance the country’s development of infrastructure, which will improve the level of economy. With the best infrastructure, the government would be able to regulate the economy players with regard to the preservation of the environment and other crucial components for the sustainable development. In this regard, the possible threats posed by the growth in industrialization to the country would significantly decline. The citizens would enjoy the services they receive due to their tax payments. This fact would stimulate a culture of compliance to the taxation policies in anticipation of continuous better services. As a result, it will compel the country to be accountable and transparent in its spending in order to meet the needs of the locals. For the locals, this will be a significant favor towards the realization of an ethically and economically governed country (Krugman 284).
The culture developed within a trickle-down economy portrays a sense of responsibility within each player in the economy. In this regard, crucial attributes of the producers, as well as the consumers, will play significant roles as expected with compliance to the law. With the law being the regulating factor, most players would be sincere and straightforward in their role accomplishment. This factor would develop a culture of accountability, which is essential in the realization of economic growth. While producers will stick to the production standards, the consumers would utilize the essential resources within their reach appropriately. In this regard, the running of the government would be smooth, thus, creating an appropriate environment for economic growth. Additionally, the law will be enforced in all government’s institutions. As a result, the government would comply with most international standards attracting more investors to the country.
Demerits of trickle-down economy
Despite the numerous benefits that the trickle-down economy would pose to a country, there are various demerits associated with it that need consideration. Initially, since this form of taxation is investment-oriented, the poor in the society would bear the burden of those ready to invest. Considering the little income that these people obtain, they will be subjected to high taxation levels, which will further worsen their situation. Thus, the income growth of these people would be less minimizing their chances of income growth through savings and investments. Additionally, the fact that the rich would be subjected to less tax would further widen the gap between the rich and the poor.
For the poor, who have little chances of evading the taxation subjected to them, the taxation system would be punitive leading to the worsening of their living conditions. Therefore, the poor would create means of retaliating back to the government interrupting with the peaceful and serene environment necessary for investment. Furthermore, the relationship between the poor and the rich would be greatly affected since the poor will feel that they are being exploited at the expense of the rich (Sloman 142). The fact that income inequality would escalate within the economy would cause tension and the poor might find themselves lacking even the privileges and chances offered to them by their employers. As a result, the overall productivity and contribution of the employees would significantly decline with time affecting the general growth of the economy.
As this form of taxation is regarded as unjust in a trickle down economy, major refinements have to be incorporated to ensure that all citizens in the country appreciate investors’ contribution. In this regard, this form of taxation is merely unjust because the incidence of tax targets the poor and not the rich. As a result, the gap between the rich and the poor will widen, leading to low productivity among the poor due to the exploitation they incur from the rich. While there are chances that the investors would provide the best working conditions, there are uncertainties as to whether this would fulfill the needs of the poor (Engdahl 185). In this regard, this will be an offer from their employers and not the government itself, which will ruin the relationship between the poor and the government. Therefore, the chances of political instability will emanate since the poor are always the majority. With the prevalence of economic instability, the country would experience hard economic times that may hamper the investment nature as well as the economic policies of the country.
With the implementation of the trickle-down economy, the country would attract various investors into the country leading to stiff competition in the industries. This form of competition would yield both positive and negative results to the industry as a whole. For the negative effects, competition would be stiff and thus the multinational companies would drive out the local companies from the industry. The effects would create imbalance in the economy since the foreigners would dominate and the locals would feel exploited in their homeland. As a result, the locals would retaliate by fighting for policies that will regulate the foreign companies while allowing their ventures to flourish. This form of upheaval would be detrimental to the country’s economic growth thus causing more harm than good (Blink 225).
Comparing the benefits and the demerits of a trickle-down economy, the need of a trickle down economy becomes very essential for the development of a country. In this regard, our country should adopt this form of economic policy to enhance economic growth. The benefits that accrue are numerous and are radical towards the realization of economic development. Similarly, the country’s citizens would receive the best support and opportunities from the investors within the country who could be either local or international. For the adversities created by the demerits of the adopted economic policy, varied measures are to be employed to counter its harmful effects. With some of the crucial elements being political instability and erosion of the local industries, the government can appropriately handle it to suit the needs of the citizens and the local investors. As a result, the government would continue reaping the benefits of the varied investments undertaken in the country. Additionally, all the government structures would be systematically aligned to suit the locals’ needs. Therefore, a trickle-down economy is essential for this country to realize economic growth and development.