So...are tax cuts the answer?

[Taxamo Welf]

Most well-off people will not move because of higher taxes.

no, i don't think all ABC1's will leave there's too many of them and most of them are 'the elite' proper, could just be well paid doctors.

But the super rich will just tax dodge as per usual no? Do youeven need to leave to do that...?

 

[Ilsonyouf]

no, i don't think all ABC1's will leave there's too many of them and most of them are 'the elite' proper, could just be well paid doctors.

But the super rich will just tax dodge as per usual no? Do youeven need to leave to do that...?

If they were to leave to avoid progressive tax rates the government sohould freeze, or even seize their assets. Thats what happened in South Africa post apartide to discourage all those rich whites from taking their cash and leaving.
Brown aint gonna do that. Any tax cuts will be paid for by cuts in services at a time when people need them the most. I also think that people in general wouldnt mind paying higher taxes if they could see what they are gettng for their money. At the moment people quite rightly feel they are bieng ripped off, especially after the virtual blank check written to bale out the financial sector.

 

[kyser_soze]

FWIW, ABC1s make up about 55% of the UK's population...

 

[bi0boy]

I bet by cutting taxes he means a one-off national insurance tax credit to put money in the pocket of hard working families on middle incomes earning between 12 and 14k if they have children and claimed tax credits last year, making them £15 per month better off in this difficult period of the economic cycle.

 

[Ilsonyouf]

FWIW, ABC1s make up about 55% of the UK's population...

There's a case for a new higher tax bracket then.

 

[kyser_soze]

Do you know what ABC1 means? Covers everyone earning £15K upwards depending on their job.

 

[ethel]

Do you know what ABC1 means? Covers everyone earning £15K upwards depending on their job.

indeed. afaik the top 10% income bracket in the UK is £40,000+

 

[Ilsonyouf]

Do you know what ABC1 means? Covers everyone earning £15K upwards depending on their job.

I'd just assumed ABC1 was the 40K+ ers. There ya go then, i never was the sharpest knife on the draw
My general point still stands

 

[shagnasty]

Tax cuts for the poorest and middle earners will go nowhere .the problem is people are not spending possibly for two reasons they are frightened of the future and are hanging on to what little they have or they are up to their necks in debt .before the crash people were borrowing and the banks willing lent the money but that as changed .i suppose you could say people banks included are hanging on to their stash

 

[Prince Rhyus]

If the government wants to stimulate domestic demand, tax cuts for the poorer earners would help as they have a higher MPC (marginal propensity to consume - i.e. a greater percentage of every pound they earn is spent, and a lower percentage saved compared to people on higher wages.) However, this is assuming that poorer earners are still in a job during a recession.

The crashing value of the pound makes imports more expensive and makes oil more expensive as oil is traded in dollars, not sterling. So don't expect huge falls in the price of petrol.

The borrowing will ultimately have to be paid back - the question is by whom.

As for public sector clientelism, there's loads of it and it does my head in that "shining examples of the success of the free market" are so dependent on public sector procurement. There is so much that is outsourced that does not need to be. IMHO outsourcing is a false economy based on a flawed theory that does not take into account all of the costs of outsourcing (e.g. contract management) nor the benefits of keeping things in house (non-monetised benefits of being able to call your IT person to advise you on a problem with your PC who can then sort things out rather than phoning a call centre in Birmingham).

Then there is the "advice" industry. Consultancy. Lots of money for hot air. Let's have some targets to reduce the consultancy spend in government.

 

[Taxamo Welf]

I'd just assumed ABC1 was the 40K+ ers. There ya go then, i never was the sharpest knife on the draw
My general point still stands

yep me too. Whoopsy

 

[JHE]

So...are tax cuts the answer?

Well the word on the grapevine seems to be that the Supreme Leader will be bringing some tax cuts along soon, as he hinted at during his important appearance on appropriate political coverage, er, GMTV.

The question is, of course, is this a good idea? Will it help or hinder the failing economy? Obviously it's a good idea to go after the sneaky loopholes of the rich, although why we need a recession to do that is beyond me.

Presumably the idea is that tax cuts for the lower brackets of earners will inject some life in consumer spending, etc, and ease the pinch. But can we really afford tax cuts, as a country? Where's the money coming from to fund the cuts?

Wannabe economists of this forum, please weigh in with your answers.

Of course tax cuts are not "the answer" (is anything?), but equally, yes, we definitely need reflationary measures at the mo - and obviously tax cuts for those on modest income are a good thing.

 

[JHE]

Larry Elliot today's Guardian has it on the button. Will tax cuts save the UK from recession? Definite no. Are they more about politics than the economy i.e. pre election gimmick? Yes.

Tax cuts are not just a gimmick. The government and the Bank of England and sundry economists and various international organisations agree that the world is going into recession (pretty much everyone agrees, AFAIK) and the UK economy in particular is going down. The world and the UK needs reflation to ameliorate the recession.

 

[lenny101]

Tax cuts are not just a gimmick. The government and the Bank of England and sundry economists and various international organisations agree that the world is going into recession (pretty much everyone agrees, AFAIK) and the UK economy in particular is going down. The world and the UK needs reflation to ameliorate the recession.

I think deflation is the worst case scenario and if eveybody stops spending money thats what we will get.