Tax cuts are a better form of stimulus than more spending

JohnOfEnfield

Common sense at last. Tax & "Investment" is a joke. More Tax & even more "Investment" is a very sick joke.

Marbury

But read Nate Silver on Mankiw's fuzzy math:
http://bit.ly/7aqqH7

John

Is this the man who was chief economic adviser to George Bush? I guess that worked out so well that we should definitely listen to him now, even though the academic evidence actually says the opposite - tax cuts mainly get banked or spent abroad, and have very little stimulus effect.

GeoffH

It's all very well to keep banging the drum for tax cuts but we're starting from the wrong place (thanks to GB and AD).

There are existing and prospective bills that must be met. Tax cuts are simply not an option for Day 1.

There has to be a transition.

It's like to old Irish joke; If you want to go to Cork I wouldn't start from here.

But we are here and have no option to start from here.

Chris lancashire

Is there ever any doubt on who best can spend money? The person who earned it or the person who taxed it off another?

Luke

Tax cuts are a better form of stimulus than spending, one of the reasons that ken clarke and others supported the temporary VAT cut.

That is one of the reasons its so diappointing that Osborne has chosen to make deficit reduction such a priority. It completely closes down his options for a stimilus through tax cuts and probably means tax rises just when the fragile recovery needs boosting.

In many other countried the right chose to back a borrowing strategy but go for growth through using the borrowing to fund stimuluting tax cuts. Instead in britain we are all led to believe that osborne is planning an early VAT hike which will choke demand rather than stimulating it.

If Osborne reversed this one part of his position on the economy i think his credibility would rise immesurably and he could fight the election on a growth platform rather than an austerity platform

The problem

THX1138

But you can save a tax cut. Anyway Osborne just seems to want to raise taxes for individuals- 50% tax rates for wealth creators and 20% VAT for everyone else.

Moraymint

Mr Heffer is on the money, yet again:

http://tinyurl.com/ykqvkrl

The Tories need to shake out of their torpor and start sounding like a political party capable of leading us out of this nightmare.

For me, the Tories are still defined by all that "sharing the proceeds of growth" b******t. What utter nonsense that was, eh? One wonders if the Tories do wealth creation these days? Probably don't need to worry too much about wealth creation if you have a personal 7-figure bank balance?

I'm one of Heffer's aspirational middle-classes (or "Coping Class" as the DT coined us) - having been screwed into the deck this past 12 years by Brown's very own brand of Marxism-by-stealth.

For me, as ever, the jury is still out on the Tories' capability to pull off some vote-winning policies. I've seen nothing yet to attract my cross on a ballot paper.

AAE

Any public spending or "investment" is by definition a net loss to the economy. The public sector faces none of the every day buffeting of supply and demand, profit and loss of private enterprise, and it would be interesting to know how much economic activity has to be generated by the private sector in order to give the government £1 to spend. And further, it would be interesting to know how much of that £1 disappears in the fixed costs of the government monolith.
Would it be so difficult for the Tories to point out that the logical conclusion of socialist economics (a contradiction in terms I know) is state bankruptcy? And that it just isn't "fair" that the "many" in the private sector are cushioning the "few" in the bloated, unproductive, blood-sucking public sector.

denis cooper

Obviously there's no room for overall tax cuts while the government is still running a budget deficit which will strain if not actually break the limits on its borrowing, so if business taxes are cut some other taxes will have to rise for the short to medium term.

Personally I'd like to see business taxes varied inversely with local GDP between different areas of the country, so that new development is preferentially encouraged in areas with lower GDP and higher unemployment.

John Moss

So we should: cut Corporation Tax to 10%, raise personal allowances to £10,000pa with a flat 35% rate above that, scrap Employee NI completely and cut Employer NI to 10%, raise VAT to 25% on all "luxury" items, cut VAT to 15% on all "standard" items and reduce VAT to 5% on all "essential" items.

Next!

Mark

Getting mortgage rates down to eurozone levels will do more than anything else to get the economy moving. Making everyone pay an extra 3% on their mortgages to cover the banks global losses is a recipe for depression.

oldtimer

Hamish McRae has some sensible things to say today, as ever, about deficits and how to tackle them:
http://www.independent.co.uk/opinion/commentators/hamish-mcrae/hamish-mcrae-we-have-a-lot-to-learn-from-ireland-1841891.html

Ireland, he believes, is tackling its deficit in the right way by tackling it now. Among other things, Ireland is keeping its 12.5% corporation tax rate. This approach, it seems, has public support. Meantime the public in the UK still seems to be in denial about, or entirely ignorant of, the scale of the problem - unless it is to encourage wealthy taxpayers to leave the country. To see how big this problem is, I suggest you read Martin Wolf in the FT today.

As for the form of fiscal stimulus, to get the full benefit from the VAT cut - much trumpeted by Labour ministers at the time - it was necessary to spend c£11000 this year. This inconvenient truth was not mentioned by the said ministers. It was left to posters at places like this to point it out.

The fiscal stimulus that works most effectively is a cut in tax on income - not a cut in tax on spending. There is a world of difference between the two.

JohnAnt

Every press photo of Osborne seems to show his well-manicured hands flopping around expressively in thin air. But that's no substitute for being able to count on the fingers of one of them. Nor does it impress if the right words don't emerge from his mouth.
So far, his economic policies are timid, shallow, and unadventurous - far too much like those of the spendthrift Labour regime.
Redwood, Redwood, Redwood. What do we have to do to get him in government?

lawrence greek

As well as cutting tax, they need to make it less onerous to employ people. Have you seen the volume of bureaucratic treacle you have to wade through before hiring someone?

Mark M

Isn't it disheartening to think that we aren't borrowing £175bn in order to have high spend and low taxes - we're borrowing that much because we've only got high taxes and ludicrously high spend. Not that this should be a surprise. Gordon Brown got a huge windfall of tax revenue thanks to the global boom, but even that wasn't enough money for him. Borrowing in every year since 2001, anyone could see the problem that were coming should the tax streams dry up.

TGF UKIP

Forget it James, Osborne ain't going to be presenting any Budget. The momentum has passed, the lead is shrinking and over the coming months will evaporate completely. Your boys repel more than they attract (outside Sarrey, Sassex, Hants, Barks and Backs at least) and they have put together no convincing message why any C2 anywhere should contemplate voting for them.

The only possible chance they've got has nothing to do with them and that's if QE comes to an end before an election and a complete flop of a gilt auction triggers a major fall in sterling. Even then smelling victory being possible for their man, the BBC will probably relegate that to fifth story on the news.