[Ignitionnet]

Originally Posted by Chrysalis

Ignitition I will try and give you a real world analysis of how I see things.

Please!

Originally Posted by Chrysalis

If I see an extra £10 a month in my wages from a tax cut, its unlikely to change my spending habits, and its unlikely to make me feel confident about the economy. Obviously high end wage earners would see a bigger difference in tax cuts but they would simply save it instead of spend it, in that respect it is not taking money out of the economy it is enforcing it in circulation (which you agreed with earlier). Someone stashing money in a bank account is not keeping it in the economy, especially when its off shore.

You're making assumptions about the behaviour of higher earners there. That may be the case for the super-rich but many increase their quality of life with their disposable income. Obviously for the super-rich there is a ceiling.

Originally Posted by Chrysalis

So lets take someone on 17k a year with say a 10k tax allowance, so taxed 20% on the 7k. £1400 tax a year, paid weekly so £26.92 tax a week on income tax before tax credits. a tax cut of 1% on income tax would drop it to £25.57 tax.

Now give me a honest answer please.

Which is going to make someone feel more confident in the economy so they more willingly spend.

A tax saving of £1.35 a week or the government maintaining spending in public services. As such avoiding announcements about half a million job losses, cuts everywhere, and local firms going bust due to loss of contracts.

I think you give people too much or too little credit and are being too narrow. You're ignoring entirely the other effects of cutting taxes and focusing purely on the saving to that one individual while taking account of all effects of maintaining public spending rather than focusing purely on services as they directly impact that one individual.

The private sector has been known to contribute to confidence in the economy as well as the public sector you know.

Your example is an extreme one, I would imagine such a person to have a minimal disposal income in any event. I am amused that you mentioned an income before tax credits though, few things show up how pathetic our taxation and welfare system is better than handing working people money to top up their incomes while charging them tax and national insurance (which incidentally you forgot to mention and for low incomes is far more significant).

Originally Posted by Chrysalis

The only logical reason I can come to that you pushing for 'more' tax cuts is you on a decent salary and you personally would gain a modest amount. Taxation generally forces money to circulate, it is not the opposite way round. As I said before the fact people moan about paying taxes is proof that they would not willingly spend the money otherwise. A contracting economy in the long run would probably make you lose more because whatever wage increases you would like would become less likely if your company is struggling.

My company is performing extremely well and frankly public spending is having a far greater effect on my personal wealth through the inflationary effects creating hundreds of billions on pounds from thin air to purchase government debt is having. Looking at the inflation figures and how they affect minor things like food prices I would suspect that inflation is going to bring pain across the income spectrum.

That however isn't the point. The point is that we don't pay for our public services, indeed at very least in the short term we are as an economy not structured to be able to pay for public services. On the books spending of close to 50% of GDP in the public sector which easily goes over 50% of GDP when factoring in those stashed away expenses is not sustainable when the overall tax burden is pretty much as high as it ever has been at about 40% of GDP and people are protesting that. I said overall burden by the way, not income tax.

It's not austerity that's the problem, it's the lack of pro-growth policies. Only those on the left advocate a reversal of austerity measures, the centre and right are far more concerned about the lack of stimulatory policies to take up the slack.

Countries that have higher standards of living generally have higher income taxes as well. The long term reason we are struggling more than france and germany, is we simply stop producing goods, which of course damages exports and GDP, the bottom line of a economy, a service economy is purely based on national confidence. The damage on that side of things was started by thatcher, however I dont put all the blame on her, blair and brown could have reversed her policies but chose not to.

Originally Posted by Chrysalis

Also I am not dead set against cuts, but any cuts should be done reasonably eg. 1-2% a year, not draconian 80billion annual cuts. These cuts dont feel thought through, they seem to be done to appease a certian part of the population. We are entering a double dip and negative growth is almost a garuantuee for the next quarter. The bright side is if you lose your job you will be paying less taxes.

Where did you get 80 billion annual cuts from? That's the entire cuts package over the entire course of this 5 year parliament.

You mentioned 1-2% a year. I hate to tell you this but these cuts average out to about 2.5% a year. That some consider them to be so draconian is merely a measure of both how excessive the state's spending has become and how accustomed to that level of spending, while remaining extremely resilient to the level of taxation required, we have become.

It is interesting how it was perfectly fine to have the most sustained and largest increase in public spending since the 2nd world war but correcting that level of spending to what is nothing more than the long term trend is draconian.

It is also noteworthy that we both object to the course of the economy, just for very different reasons.

Regarding your quality of life comment, doesn't work. 4 of the top 5 have lower tax takes than we do and one of them is having to engage in strong austerity due to overspending despite the state eating over 50% of the entire country's income in taxation.

It's a slightly better picture if we go out to the top 10 but still 7 out of 10 have a lower tax take as a % of the economy than us. The evidence would appear to disagree with you regarding high state spending equaling quality of life.

I tend to take the view that high state spending absolves people of responsibility for themselves, takes away some of the incentive to strive to be better, and fosters a sense of entitlement. Recent experiences in the UK of Labour's grand social engineering project would appear, at first impression, to bear this out.