Do you take the point that this could help to save the taxpayer money, and not cost it a penny?
VAT to be cut by at least 2%!
- Thread starter Hen_Dawg
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Do you take the point that this could help to save the taxpayer money, and not cost it a penny?
Soldato
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You expect results. The exact nature of how it will ultimately affect 2009 GDP depends on their economic modelling. No one is(or will) claim that this will resolve the recession.
You are however somehow assuming, that because the government is implementing this that they believe that it will fix everything. You just don't want to see this as one of the best policies implementable do you? The tories actually came up with playing with interest rates.
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Think he means its easier to implement and relatively cost free (to the government)
Soldato
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2% off petrol ? Or maybe not quite that much
Its possible that tax revenue could rise with a falling percentage. The idea is to stop a downward spiral of recession, less spending and therefore less tax revenue
Its possible that tax revenue could rise with a falling percentage. The idea is to stop a downward spiral of recession, less spending and therefore less tax revenue
You don't understand then - thought not.
Are you aware that when Thatcher cut income tax rates, income tax revenues increased? Why do you think that was?
Imagine the cost to the taxpayer of funding a deep recession - eg. a double whammy of lower tax receipts and increased benefit payouts.
If this VAT cut lessens the impact of the recession, it could well save much of the above costs, which may well outweigh the cost of the VAT cut. Businesses benefiting from the VAT cut may be less likely to lay off workers; this means government keeps receiving income tax from those workers and doesn't need to pay them unemployment benefits.
Does it make sense now?
The reason for that is because of the Philips curve - this is a different issue. I, however agree with your general point.
You're not supposed to run a large budget deficit throughout though... This ensures you can borrow when you need to fund spending due to reduced tax return.
Show me where tax revenue increased beyond that predicted by GDP growth. At the time some(read few) people believed that Thatcher and Reagan's tax cuts would increase tax revenue because we were beyond the optimal rate of taxation as determined by the Laffer curve. This was completely wrong.
I'm not saying the VAT cut is wrong, as shown by my past posts in the tread, but that tidbit of information is wrong.
Also, Christo, nothing to do with the Phillips Curve.
edit: http://en.wikipedia.org/wiki/Laffer_curve#Context_in_U.S._history
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Soldato
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Just the same as a shop cutting Gross Profit in the hope that more people will buy their goods, being the theory. The problem you are not taking into account is that you are relying on someone else to act as well and the likelyhood is that this will not actually happen. Back to the shop analogy, even if we do get more purchases, to recoup the cost, sales will have to increase by c.15% to get away with zero cost to the exchequer - can you honestly see that happening?? When you think it through, not going to happen now is it...
What worries me is that you work high up in the banking system don't you? IIRC? If so it is strange that this all seems an alien concept to you
I explained in my post yet you either haven't read it fully or haven't understood it :/
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Man of Honour
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I am not naive enough to say that the finacial crisis is the fault of Labour but as a taxpayer I am fully entitled to moan that they have put not a penny aside as a safety net when they were raking in extortionate tax rises via the backdoor while abolishing tax breaks for married couples etc.
Also, the recent rebate in Sepetmber's pay packet of £60 was part of a £2 billion plus borrow by the Government and the current raft of tax breaks will be from borrowing and will have to be paid back by the taxpaying schmucks.
Yes, something had to be done but it is arguably too little, too late and on the back of reckless borrowing which is why Gordon Brown's title of the Iron Chancellor always puzzled me. 10 years of prosperity and public service spending under Labour was largely on the back of his borrowing while Chancellor and sticking to Conservative spending plans for the first couple of years.
Gordon Brown was quick to lambast the Tories for boom and bust years but he is strangely quiet on that subject now.
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No the analogy is similar to how the total revenue curve varies as you change the price. the Laffer curve does predict an increase in tax revenue with a decrease in taxes at certain tax levels and elasticities.
It depends on how people substitute between labour and leisure and the magnitudes of the income effect.
http://en.wikipedia.org/wiki/Slutsky_equation (applied to leisure/labour endowments with marginal tax rates)
edit: In this VAT case, the model is even easier (with regards to the laffer curve). Something taught in every intermediate microeconomics textbook.
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Associate
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My thoughts exactly
Demand?
![[TW]Fox](/data/man-of-honor/2009.png){kind=avatar}
No, of course it isn't. Not sure why such a simple statement got such a hostile reaction - frankly I think the measures Brown is taking are short sighted and will be more trouble than good, I simply posted that for informational purposes with no opinion attributed to it.
nor do they have any form of NHS or social services.
Man I love the way you UK people want everything for nothing.
nor do they have any form of NHS or social services.
Man I love the way you UK people want everything for nothing.
I don't want everything for nothing, I want everything for the best, most efficent cost. That's a totally different idea.