Double Dip now inevitable?
Discussion
Guam said:
Maxf said:
rypt said:
You lower taxation levels, and business rates to help increase the tax intake 
How would lower business rates increase the tax take? I understand the argument for other forms of taxation, but business rates doesnt fit in with this.Maxf said:
Futuo said:
What is better for the tax payer, paying some lentil munching politically correct non jobber 60k a year plus perks or giving them £60 a week, mmm that's a toughies isn't it?
But they will pay an average of say 30% in income tax, then VAT on items bought, money pumped into the local economy etc etc. Of course, it is money 'gifted' via the non-job but as long as it stays in the country then its not too terrible.Assuming you put them on the dole instead, you'll pay them £60 a week, plus a number of benefits and freebies - council tax waived, housing paid for and lots of cash taken out of the private sector through lower spending.
Again, not agreeing with the non-jobs but I just can't see how cutting them overnight would be positive for the economy.
The spending you talk of is basically our problem here. When you fund it through taxation it is a drag on the wealth creating economy. When you fund it through borrowing/printing money then it's inflationary. When you do a bit of both, it's New Labour.
"Overnight" is not what we need to look at. Overnight we're f
ked, and over the rest of the year the country will get poorer than it is now, whatever we do. Over the next 3, 4 and 10 years though what we do now is important. If we saddle ourselves with further debts, and keep input prices artificially high then we are guaranteeing ourselves a decade of stagnation and decline. If we make the cuts we need to then we can grow properly.Someone else asked how cutting taxes will increase revenue. It's called the Laffer curve
http://en.wikipedia.org/wiki/Laffer_curve
In a nutshell, taxes discourage the taxed activity (income, in the case of income tax) so as you cut taxes you get more of the activity, hence revenue rises. Like any price really, there is a point where revenue is optimised.
What people forget about the Laffer curve is that, just as with other price points, it moves. So while a certain tax might not have discouraged the activity in a boom time, as margins are squeezed in leaner times so the point at which the activity ceases to be worthwhile moves, and the revenue optimising tax rate shifts accordingly.
Most of all, get ready for inflation.
Why?
Because many of the government's "liabilities" are in the form of future wages and pensions. If inflation runs at 5% and pay awards are held to 2.5% that means the real government debt is reducing.
Whoever gets into power will need to stop the index linking of public sector pensions immediately. it's less controversial than actual wage cuts yet has much the same effect. Over time it also reduces the burden of the pensioners themselves. In cases of "real hardship" the state pension safety-net will come into play.
Or to put it another way, the government will probably want higher inflation. The effect is much the same as dropping base rate to 0.5% where suddenly savers are getting no return on their money but banks are still pocketing a nice profit margin to "rebuild their balance sheets".
Why?
Because many of the government's "liabilities" are in the form of future wages and pensions. If inflation runs at 5% and pay awards are held to 2.5% that means the real government debt is reducing.
Whoever gets into power will need to stop the index linking of public sector pensions immediately. it's less controversial than actual wage cuts yet has much the same effect. Over time it also reduces the burden of the pensioners themselves. In cases of "real hardship" the state pension safety-net will come into play.
Or to put it another way, the government will probably want higher inflation. The effect is much the same as dropping base rate to 0.5% where suddenly savers are getting no return on their money but banks are still pocketing a nice profit margin to "rebuild their balance sheets".
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff