Which Taxes Should Rise?

Generali

It is pretty clear that in the UK, public spending at 52% of GDP is too high, especially given that it will need to rise to meet the costs of an ageing population. It is also clear that in the short term it is impossible to cut public spending as this takes time.

Given that markets seem to be losing patience with Governments borrowing large amounts of money with no clear plan of how to return to a sustainable path where extra borrowing < GDP growth, taxes will have to rise. Given the hoo ha about increasing CGT I thought a poll might be in order.

You can vote more than once as you may think more than one tax should be increased. I haven't put in 'other' as little chips on stamp duty or other minor taxes just won't cut it. Environmental taxes are taxes on output or consumption depending on whether they are levied on the producer or consumer.

HAMISH_MCTAVISH

No taxes should rise

Generali wrote: »

It is pretty clear that in the UK, public spending at 52% of GDP is too high, especially given that it will need to rise to meet the costs of an ageing population.

True

It is also clear that in the short term it is impossible to cut public spending as this takes time.

False. We are already cutting public spending.

Although I accept your point about it taking time to make large cuts.

Given that markets seem to be losing patience with Governments borrowing large amounts of money with no clear plan of how to return to a sustainable path where extra borrowing < GDP growth, taxes will have to rise.

Questionable assumption.

There is much media/internet speculation about the markets losing patience, but the reality is that most bond issues to date have been oversubscribed, and the UK is in a far better position both in terms of total debt and existing debt maturity dates than many other countries that have had issues.

Given the hoo ha about increasing CGT I thought a poll might be in order.

Oh Goody......

I do so like your polls, Generali.;)

You can vote more than once as you may think more than one tax should be increased. I haven't put in 'other' as little chips on stamp duty or other minor taxes just won't cut it. Environmental taxes are taxes on output or consumption depending on whether they are levied on the producer or consumer.

But you missed out the option for lowering the nominal rate of most taxes to spur recovery, growth, inward investment and eventually increase the overall take.

drc

Can you define what you mean by output?

Generali

Taxes on capital

HAMISH_MCTAVISH wrote: »

Oh Goody......

I do so like your polls, Generali.;)

Excellent.

HAMISH_MCTAVISH wrote: »

But you missed out the option for lowering the nominal rate of most taxes to spur recovery, growth, inward investment and eventually increase the overall take.

I think that comes under the final point - I'm pretty sure that cutting the tax take in the short term from here would be viewed pretty dimly by Mr Market. I agree that is the best economic medicine in the long term of course. The public sector is far too big in the UK.

vivatifosi

Taxes on capital

If, as was claimed on this morning's news we are having to borrow every fourth pound that the government is spending, then it is clear that we have to raise taxes in most areas as well as cutting public spending in most areas. There's no point in saying "it isn't fair to cut child benefit", "it isn't fair to up CGT" or "it isn't fair to cut public sector employment" as sadly they'll probably have to put all taxes up a bit and reduce all spend a bit. It will hit all of us.

drc

vivatifosi wrote: »

If, as was claimed on this morning's news we are having to borrow every fourth pound that the government is spending, then it is clear that we have to raise taxes in most areas as well as cutting public spending in most areas. There's no point in saying "it isn't fair to cut child benefit", "it isn't fair to up CGT" or "it isn't fair to cut public sector employment" as sadly they'll probably have to put all taxes up a bit and reduce all spend a bit. It will hit all of us.

I agree, except with the word 'bit' .

Generali

Taxes on capital

drc wrote: »

Can you define what you mean by output?

It could be certain types of output (eg taxing carbon dioxide produced by companies as they produce other things, taxing the production of financial services) or taxing all output (eg a turnover tax on companies). Output is taking a series of inputs, adding some value (hopefully) and selling it.

vivatifosi

Taxes on capital

drc wrote: »

I agree, except with the word 'bit' .

I love the word bit as it is deliberately vague. However in this case I do feel that it will be more than 8 bits adding up to a very big "bite":eek:.

HAMISH_MCTAVISH

No taxes should rise

vivatifosi wrote: »

, then it is clear that we have to raise taxes in most areas as well as cutting public spending in most areas. .

Whilst I actually don't disagree with much of your statement, it's worth pointing out that balancing the governments books is not as simple as balancing a households books.

For example, increasing tax rates can actually reduce tax take.

As counterintuitive as it sounds, a 70% tax rate would probably raise far less money than a 35% tax rate, due to the disincentive to invest or earn more.

Nobody knows for sure the optimum level of taxation, and it differs from country to country, but I rather suspect the UK is already at or very close to the point where higher taxation rates would reduce overall income from tax.

In which case raising taxes could decrease the amount of income for the government, and widen the deficit.

IveSeenTheLight

Taxes on capital

I voted for an increase in tax across the board.
By spreading out the tax increases, you minimise individual impact.
I also believe that spending should be cut to a level where we are spending less than we are taking in.
We need to do this to reduce the debt.

It may be harsh, but the first economic lesson should be that if you can't afford it, you can't buy it.
We are past the point of speculating to accumulate and need to cut our cloth accordingly.

I'm not sure how long it would take (5, 10, 20 years), but ideally we should work to erradicate the debt completely. That way the taxes will be utilised more efficiently on what we need as a society instead of the wastage that is debt interest.

Then going forward, if we need to borrow against future years income to fund developments in the current year, then the next years budgets should need to be cut to recouperate / pay off the debt incurred.

Utopian maybe, but first lesson economics as far as I'm concerned and how I was brought up.

vivatifosi

Taxes on capital

HAMISH_MCTAVISH wrote: »

For example, increasing tax rates can actually reduce tax take.

Granted. And that's why I said most. All tax rises and spending cuts are going to have consequences, whether it is increasing inflation through adding to VAT or possibly reducing the tax take (which I hasten to add should be avoided). The government should be able to scenario plan and run the numbers on all of these. I use the word "should" with some care though. After all, it doesn't look as though the previous incumbents scenario planned the impact of removing the 10% tax band for the low paid...