That's not how the economics works. If you take the money out of circulation via tax into the big pot, you're taxing it just the once. If you allow it to be spent, you are taxing it on every single transaction that is made, and then on the subsequent earnings. Now, this isn't an absolute of course, because the government itself can act as a primer for economic growth, but the state isn't remotely as efficient at that as the private sector is. This is rather a separate issue as to whether that money is better spent by the state, because you can of course make the argument that the social dimension is more important, it's just about how the circulation of money works, and why it is that lowering tax can generate higher tax receipts. In an ideal world, when you are in recession is the best time to cut taxes, because it promotes economic growth that's badly needed in such circumstances, but it is of course practically impossible for a government to do that because they need the revenue so badly.
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Budgetamania 2018
- Thread starter Damocles
- Start date
That's not how the economics works. If you take the money out of circulation via tax into the big pot, you're taxing it just the once. If you allow it to be spent, you are taxing it on every single transaction that is made, and then on the subsequent earnings. Now, this isn't an absolute of course, because the government itself can act as a primer for economic growth, but the state isn't remotely as efficient at that as the private sector is. This is rather a separate issue as to whether that money is better spent by the state, because you can of course make the argument that the social dimension is more important, it's just about how the circulation of money works, and why it is that lowering tax can generate higher tax receipts. In an ideal world, when you are in recession is the best time to cut taxes, because it promotes economic growth that's badly needed in such circumstances, but it is of course practically impossible for a government to do that because they need the revenue so badly.
Fame Monster
Well-Known Member
That's not how the economics works. If you take the money out of circulation via tax into the big pot, you're taxing it just the once. If you allow it to be spent, you are taxing it on every single transaction that is made, and then on the subsequent earnings. Now, this isn't an absolute of course, because the government itself can act as a primer for economic growth
The Government doesn't take the money out of circulation though: it recirculates it. They don't just put it in a big pot and burn it, they give it to a public sector worker who spends their money on all of the things that a private sector worker would spend their money on had they not been taxed. So the money isn't taxed just once because all of the things that the public sector worker spends their money on generates jobs, generates VAT and generates economic growth.
This is rather a separate issue as to whether that money is better spent by the state, because you can of course make the argument that the social dimension is more important, it's just about how the circulation of money works, and why it is that lowering tax can generate higher tax receipts. In an ideal world, when you are in recession is the best time to cut taxes, because it promotes economic growth that's badly needed in such circumstances, but it is of course practically impossible for a government to do that because they need the revenue so badly.
Lowering tax can generate economic growth but public spending in the right areas generates more economic growth than simply lowering taxes which is why governments rarely slash taxes but rather tax and massively increase spending in the event of a recession. Also, with public spending and redistribution rather than an untrammelled model of capitalism, you get a fairer and more just society.
The Government doesn't take the money out of circulation though: it recirculates it. They don't just put it in a big pot and burn it, they give it to a public sector worker who spends their money on all of the things that a private sector worker would spend their money on had they not been taxed. So the money isn't taxed just once because all of the things that the public sector worker spends their money on generates jobs, generates VAT and generates economic growth.
Yes, that's the point though, it's less efficient in economic terms to take it off someone and hand it to someone else. It's done for political reasons of fairness and so forth. I'm not for a second arguing you shouldn't do this, I'm highlighting why a tax cut can bring in more revenue, because....
Lowering tax can generate economic growth but public spending in the right areas generates more economic growth than simply lowering taxes which is why governments rarely slash taxes but rather tax and massively increase spending in the event of a recession. Also, with public spending and redistribution rather than an untrammelled model of capitalism, you get a fairer and more just society.
...this is an ideal which rarely ends up working out. It's one of those irregular verbs: I invest, you spend, he wastes. ;-) The state is far less efficient at the multiplier than the private sector is, which is why government run businesses tend to be so abysmally run. But I think more or less everyone would agree that you absolutely need redistribution of wealth, and not just for reasons of fairness, but because you need to lift everyone up in order to generate that economic growth too; the debate is always around how much, and how you make it as fair as possible without specifically impacting the growth.
Fame Monster
Well-Known Member
Yes, that's the point though, it's less efficient in economic terms to take it off someone and hand it to someone else. It's done for political reasons of fairness and so forth. I'm not for a second arguing you shouldn't do this, I'm highlighting why a tax cut can bring in more revenue, because....
.
It's not less efficient as a rule. I'd say as a rule, it's more efficient because the process of redistribution actually generates economic growth by employing people. The question of whether, all things considered, taxing and spending individuals generates economic growth depends entirely on what the money gets spent on versus what it would otherwise have been spent on had it not been taxed in the first place which is a very complex calculation. In the vast majority of cases though, I would say governments predict that tax rises on individuals generate more for the treasury after all economic ramifications have been considered.
...this is an ideal which rarely ends up working out. It's one of those irregular verbs: I invest, you spend, he wastes. ;-)
It's not an ideal at all. It's widely accepted economic theory practiced in the event of a recession by almost all countries across the world, whether they are left wing or right wing.
The state is far less efficient at the multiplier than the private sector is, which is why government run businesses tend to be so abysmally run.
This is idealistic. The Conservative Party Chancellor has just stopped PFI and PF2 which reveals a lot about the Treasury's opinion on this issue.
But I think more or less everyone would agree that you absolutely need redistribution of wealth, the debate is always around how much, and how you make it as fair as possible without specifically impacting the growth.
On this, we agree. But I would say concerns around how tax affects economic growth is more relevant to taxes on businesses than it is to individuals.
It's not less efficient as a rule. I'd say as a rule, it's more efficient because the process of redistribution actually generates economic growth by employing people. The question of whether, all things considered, taxing and spending individuals generates economic growth depends entirely on what the money gets spent on versus what it would otherwise have been spent on had it not been taxed in the first place which is a very complex calculation. In the vast majority of cases though, I would say governments predict that tax rises on individuals generate more for the treasury after all economic ramifications have been considered.
Supply and demand is THE most efficient allocator of resources. The reason we don't have untrammeled capitalism is because it would be socially hideous and unfair. The state isn't more efficient, it's just essential and desirable to a significant extent.
It's not an ideal at all. It's widely accepted economic theory practiced in the event of a recession by almost all countries across the world, whether they are left wing or right wing.
It's Keynesianism. I am aware of this you know. But it's not necessarily widely accepted as pure economic theory - as I say, many economists argue you should do the opposite - but it probably is widely accepted that it's the only viable option politically. Be careful not to ascribe your own beliefs (I agree with you on it, by the way - the point is I am saying there are no absolute truths) to what is right or wrong. But Friedman of course was totally hostile to it.
This is idealistic. The Conservative Party Chancellor has just stopped PFI and PF2 which reveals a lot about the Treasury's opinion on this issue.
lol at me being accused of idealism. PFI was the antithesis of the free market, it was just deferred government spending. It was a terrible idea on every level, and thank God it's gone.
On this, we agree. But I would say concerns around how tax affects economic growth is more relevant to taxes on businesses than it is to individuals.
It's interrelated, which is why it's so damn complex, and why no one really understands what the particular outcomes of particular decisions will be. So much of economic theory gets contradicted by what happens in reality.
Can we stop the multiple quotes please? It's a ballache. I will if you will!
Fame Monster
Well-Known Member
Can we stop the multiple quotes please? It's a ballache. I will if you will!
Haha ok, I can see your struggle.
Haha ok, I can see your struggle.
Bollocks. I was hoping that was corrected before you noticed!
It's not less efficient as a rule. I'd say as a rule, it's more efficient because the process of redistribution actually generates economic growth by employing people. The question of whether, all things considered, taxing and spending individuals generates economic growth depends entirely on what the money gets spent on versus what it would otherwise have been spent on had it not been taxed in the first place which is a very complex calculation. In the vast majority of cases though, I would say governments predict that tax rises on individuals generate more for the treasury after all economic ramifications have been considered.
It's not an ideal at all. It's widely accepted economic theory practiced in the event of a recession by almost all countries across the world, whether they are left wing or right wing.
This is idealistic. The Conservative Party Chancellor has just stopped PFI and PF2 which reveals a lot about the Treasury's opinion on this issue.
On this, we agree. But I would say concerns around how tax affects economic growth is more relevant to taxes on businesses than it is to individuals.
This is not true. When you pay tax you do not redirect any money to a public sector worker. When you pay taxes it goes into a pot and gets distributed to public budgets which are then spent on whatever.
I can guarantee that a big portion of that whatever will not get spent on something that contributes to the economy nor will it go to peoples wages. Some will yes but the majority won't.
Just as an example, a portion of tax the size of the annual education budget currently goes to nothing but paying off our debt interest. Do you think we should increase taxes to pay more of it off, in theory we should but good luck selling that one.
In my opinion the best way for a government to help spending locally is to increase peoples paypackets and increasing taxes will not help with that.
Fame Monster
Well-Known Member
This is not true. When you pay tax you do not redirect any money to a public sector worker. When you pay taxes it goes into a pot and gets distributed to public budgets which are then spent on whatever.
I can guarantee that a big portion of that whatever will not get spent on something that contributes to the economy nor will it go to peoples wages. Some will yes but the majority won't.
Just as an example, a portion of tax the size of the annual education budget currently goes to nothing but paying off our debt interest. Do you think we should increase taxes to pay more of it off, in theory we should but good luck selling that one.
In my opinion the best way for a government to help spending locally is to increase peoples paypackets and increasing taxes will not help with that.
I was gonna respond to this but you contradict yourself 3 or 4 times so I honestly don't know where to start.
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hilts
Well-Known Member
We've all heard this disingenuous quote before about taking people out of tax altogether. What they don't like to highlight the fact that this is a universal benefit because everyone who earn above £12.5k gets it too. None of this sustainable and we are being fast tracked to the capitalism on steroids the US is on. When you add in the raise on the 40% rate to £50k this quite clearly was the sign we are in for another GE because May knows that her brexit plan is shot. It contradicts everything spreadsheet Phil and his party has said in the past.
When personal allowances go up tax rates should be adjusted further up the scale so the wealthy are not receiving extra. It seems strange to me we have only 2 basic rates of income tax. It should be staggered. The govt should be doing everything it can to raise the take home pay for the low paid. Keep increasing minimum wage and personal allowance, stagger tax bands, create an employee fund based on vat that goes to workers of the company.