By Daniel’s definition I’m a neo-con, but I don’t believe that tax cuts in themselves reduce the amount of tax revenue that can be spent on public services…
If you reduce taxes, very quickly people use their money more wisely than the government did and create wealth that they then are taxed upon. This self-fulfilling loop of fiscal benefit obviously has its limitations (as taxes get too low), but there’s no risk that the UK is anywhere near that!
Posted In: Political, Tax, News and Politics, David Cameron, Tory Leadership, David Davis, Tory, Socialist, Conservative, Labour, Capitalism
December 3rd, 2005 at 5:55 pm
I’m not entirely sure where you’re coming from with this. My argument was that tax cuts don’t necessarily mean cuts in spending because a temporary deficit (or not so temporary) is ok while we wait for growth to catch up.
I think this is exactly what you’re saying, right?
(ps. It’s nice to know someone’s read it!)
December 3rd, 2005 at 6:25 pm
I think what Gav is saying is that if you cut taxes, people will just spend more money and the tax that has been cut will just be collected from that in the way of VAT, fuel duty, etc.
December 3rd, 2005 at 10:15 pm
Well, I can see what you’re saying Wonko, but you are still better off after an income tax cut, no matter what the effective tax rate is upon spending. For instance, if you get a tax cut of £100, and VAT is at 900%, then you are only effectively better off by £10, but you are still better off.
Perhaps Gav is referring more to the growth stimulus that tax cuts would create.
(Lets not forget the Laffer curve here as well)
December 4th, 2005 at 11:47 am
I am referring, as you were Daniel, to the growth stimulus…
Ironically I’ve heard the argument made many times and thought I’d found a clear way of saying it for those around me who don’t understand - obviously not!