Fear of tax, who else has stopped spending?

sreppaw

I have read lots of articles about how consumer spending is falling, and I have been thinking about reasons why I personally have cut back spending recently.

I have come to the conclusion that it is my fear of tax increases which is the major knock to my confidence in future income.



My reasoning follows:
I can see the government massively overspending, by some reports up to 12% of GDP this year or £180bn, with no end in sight!
(See http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/04/funding_record_borrowing.html)
As roughly 50% of GDP is now tax, to cover this (without serious spending cuts) would require something like a 24% increase in tax (12% of GDP), if the overspending continues.
As I earn over the average (mean & median) I am expecting a big drop in net income from tax increases, so I have cut back in preparation.
Also from a deflationary point of view, in the future money will be worth more, on a consumer basis, as it will be harder to earn and keep the same amount after tax.

In conclusion I think the government really needs to get a grip on public spending to restore confidence in those who actually have money to spend.

lostinrates

We don't spend a lot because we are saving for property. BUT we are very aware that things could all change in the future. The budget today will makes things a little clearer, but I think the next election, whatever the result, will be a big break because it then suggests a terms worth of security at the top. I think America's relief was not just the administration change but the fact that they now knew how it was going to be for a few years.

ad9898_3

I read somewhere, that we would need 8p on income tax between now and 2016 to pay for the bailouts alone, nevermind the other stuff the government has wasted money on, and it isn't even over yet.

ad9898_3

sreppaw wrote: »

In conclusion I think the government really needs to get a grip on public spending to restore confidence in those who actually have money to spend.

Don't forget, this is a Labour Government, they don't 'do' getting a grip on public finances.:rolleyes:

1984ReturnsForReal_2

ad9898 wrote: »

Don't forget, this is a Labour Government, they don't 'do' getting a grip on public finances.:rolleyes:

But they do do lies, spin, altering statistics, controlling of information release & the handcuffing of acurate media reporting.

So at least things will look much better than what they really are....

Graham_Devon

It looks like labour is now going to take a socialist stance. Take from the rich to give to the poor.

If we read between the lines of the budget today, I expect to see a lot of redistribution of wealth. One labour MP was only talking about it yesterday on Newsnight saying it's the way forward.

So this may mean those on middle incomes could be left with nothing less to pay, but nothing more to pay. Those on low incomes pay less, and those on higher incomes (especially those over 100,000, who could be paying 60% in tax soon) will be paying a lot lot more.

This won't be done only through income tax, but also through pensions, asset ownership, large business's like Tescos etc being forced to put more into the community etc.

Unfortunately this will also mean those on low incomes and those on benefits have even less of a reason to go earn themselves, and those with the means to give more to the country, simply leave.

But I think personally, it's something labour will try and then pass on to the tories to sort out. There is a LOT of sentiment towards the rich paying more from core labour voters.

apt

One of the taxes that is most likely to be increased substantially after the next election is VAT, so if there are goods you need it makes more sense to buy them now than in a a year or two when VAT may well be 20% or more rather than 15%. NI will be another target which both Labour and Conservatives ludicrously pretend is not a tax. Fear of unemployment and a general lack of confidence are far more significant than taxation in encouraging people to save rather than spend.

Rochdale_Pioneers

Graham_Devon wrote: »

Unfortunately this will also mean those on low incomes and those on benefits have even less of a reason to go earn themselves, and those with the means to give more to the country, simply leave.

But I think personally, it's something labour will try and then pass on to the tories to sort out. There is a LOT of sentiment towards the rich paying more from core labour voters.

Wasn't there a survey showing 80% in favour of the vrich paying more? Ultimately if you did very well out of the boom its only fair that you cough up to help pay for the bust. Why should the people on the bottom suffer by having their already meagre wages frozen and their services scrapped?

And we get this rubbish about the rich leaving every time tax increases are mentioned. Yes - if its a 90% supertax. But if we put top rate up to 50% would people on £80k a year really up and leave en masse? Did they all through the 70s and 80s when top rate was up there? As an argument its simply disconnected with common sense or the facts. A good right-whinge argument in other words.

ad9898_3

1984ReturnsForReal wrote: »

But they do do lies, spin, altering statistics, controlling of information release & the handcuffing of acurate media reporting.

So at least things will look much better than what they really are....

This is so true, hence I think the 'bounce' we are currently seeing will fizzle out once the cold hard facts come into play, the media are being so tenuous with the truth at the moment, it's not funny, it will all come out in the wash though, give it time.

lostinrates

apt wrote: »

One of the taxes that is most likely to be increased substantially after the next election is VAT, so if there are goods you need it makes more sense to buy them now than in a a year or two when VAT may well be 20% or more rather than 15%. NI will be another target which both Labour and Conservatives ludicrously pretend is not a tax. Fear of unemployment and a general lack of confidence are far more significant than taxation in encouraging people to save rather than spend.

I don't disagree....but of course, the problem is we acquire money through life, not have it in advance to do with what we would like to through out the course of life.

For us buying the right property is the priority. if we need something it takes priority to the point we can't wait for anything, but for delayable purchases, they are lower down the list ATM.

garthdp

1984ReturnsForReal wrote: »

But they do do lies, spin, altering statistics, controlling of information release & the handcuffing of acurate media reporting.

So at least things will look much better than what they really are....

I think you will find that is not just a labour government...........