Tax hikes

Graham_Devon

I have just been speaking to someone who said something to me about the impending tax hikes, and said something pretty scary!

We now here of x billions all the time, and a billion doesn't really seem that much as it's now 10's of billions we talk about.

But, heres an example of just how much it is going to cost us in tax hikes...

For each 2p rise in fuel tax, the government gets approx £550m a year.

Therefore, to raise £10bn, over a single year from fuel, we would need to add 18pence to each litre of fuel in duty. Or, on a 50 litre tank, £9 extra tax.

However, that doesn't even pay for this single months borrowing, of £16bn.

To pay solely for this months borrowing, we would need to add roughly 29pence to every single litre of fuel, or, £14.50 to every 50 litre tank.

Over a whole year, that £14.50 cost to us for every single tank, would pay solely for this months borrowing. Nothing else. Just the actual borrowing....and I'm not adding interest here.

Now, I'm not pretending this will happen, just thought it was a good analogy someone just used to explain the sheer size of the problems we face, and the sheer amounts of money being talked about.....but it is an indicator of just how highly taxes may have to rise.

kennyboy66_2

I thought that a 1p increase in basic rate income tax raised about £2bn.

As we probably need to raise at £30bn from tax rises, you could say its the equivalent of a 15p raise in income tax

Graham_Devon

kennyboy66 wrote: »

I thought that a 1p increase in basic rate income tax raised about £2bn.

As we probably need to raise at £30bn from tax rises, you could say its the equivalent of a 15p raise in income tax

I'd guess it raises less than that now too, what with employment going up and wages kind of stagnating.

I just wonder where the tax rises are going to hit. I'd guess fuel, income tax, maybe NI, and then a raft of stealth taxes.

chucky

Graham_Devon wrote: »

I'd guess it raises less than that now too, what with employment going up and wages kind of stagnating.

I just wonder where the tax rises are going to hit. I'd guess fuel, income tax, maybe NI, and then a raft of stealth taxes.

i sort of see what you're saying but the number of employed people has only reduced by around 2%. is that a huge loss - you'll say that they're going to need to get benefits but that isn't the point you're making.

what tax revenues are being hit more - corporate or personal.

corporate taxation reveneues will/has obviously got a battering - the investments banks especially left a big hole in tax revenues.

there are probably less higher tax earners too.

Old_Slaphead

2p extra on standard rate raises about £8m, increase vat to 20% another £12m, say £5m on fags, petrol, booze and other stealth taxes = £25m total

Another £50-60m from PS & welfare cuts.

That lot just about halves the deficit.

bendix

Tax hikes are a political stunt, aimed at placating the masses who somehow think they are getting one over the 'fat cats.' Using tax hikes to address the budget shortfall is like using a cotton bud to clean an elephant.

The only meaningful way to deal with the deficit is to cut funding. £70bn on Trident for a start, slash public services and freeze welfare payments, public sector salaries and pensions.

We will not tax ourselves out of this mess. It is p*****g in the wind. Spending cuts are what is needed.

Pennywise

I've been saying for a while that the tax increases are going to be far higher than people think. Those I've been talking to are thinking maybe 1p or 2p on income tax, and maybe VAT back to 17.5% or maybe even as high as 20%. I've been saying for a while that we'd more likely be seeing basic rate tax at 25-30% and/or VAT upto 22.5 or 25%, with similar increases on corporation tax, NIC, etc. The deficits are huge and tinkering about, a percent or two here and there is just not going to cover it.

I think we're more likely to be looking at significant tax hikes (maybe not as bad as I've said above but more than the normal slight changes) in conjunction with 10-20% spending cuts.

It's going to hurt!

Graham_Devon

chucky wrote: »

i sort of see what you're saying but the number of employed people has only reduced by around 2%. is that a huge loss - you'll say that they're going to need to get benefits but that isn't the point you're making.

what tax revenues are being hit more - corporate or personal.

corporate taxation reveneues will/has obviously got a battering - the investments banks especially left a big hole in tax revenues.

there are probably less higher tax earners too.

The 2% reduction in employed people (so far) does not include people taking less hours, self employed people with less/no work etc.

So although it makes it seem miniscule, the picture is far far wider than what's being painted there.

Graham_Devon

bendix wrote: »

The only meaningful way to deal with the deficit is to cut funding. £70bn on Trident for a start, slash public services and freeze welfare payments, public sector salaries and pensions.

You can't just freeze welfare payments, and public sector wages.

You need to keep up with inflation / other sectors.

It would not bein in the countries interests to freeze a whole sectors wages while the private sector carries on getting bonuses and rises. Firstly it wouldn't save all that much and secondly, tax revenues would fall even further and a bigger mess would be created, inclduing unrest, thirdly, other welfare payments would go up such as tax credits to keep these people on par with the private sector.

mewbie_2

Tax or spending cuts - it all takes money out of the economy. Prolongs the recession, or the 'recovery' and could mean that house prices (as a big ticket item) have much further to fall.

Hands up who wishes they sold in 2007?

Heyman_2

mewbie wrote: »

Tax or spending cuts - it all takes money out of the economy. Prolongs the recession, or the 'recovery' and could mean that house prices (as a big ticket item) have much further to fall.

The big problem is, whether you tax or initiate cuts, as you say it has a knock-on effect to the wider economy. Cut defence spending? That's lots of people out of a job. Increase VAT? That puts prices up = inflation. Increase income tax? That's money out of people's take home pay = less to spend = less money for businesses.

It's going to be a pretty fragile balancing act for this government!

mewbie wrote: »

Hands up who wishes they sold in 2007?

Nah, I only bought at the end of 2006 and quite happy thanks.