You have to feel for the people who live in Britain at the moment. As if the recent hurt of losing their queen, the insult of having to put up with King Charles, and the prospect of a cold and costly winter weren’t bad enough, they also have a new prime minister who seems determined to crash their economy and ruin your economy. retirements
In Liz Truss’s first financial update after winning the leadership of the Tories and replacing Boris Johnson, she and her Chancellor of the Exchequer, Kwasi Kwarteng, attempted to channel Margaret Thatcher for slash highest tax rate in the country from 45 percent to 40 percent. This was a leadership campaign promise they were determined to keep, one they believed would help Britons deal with runaway inflation and reverse the fortunes of the country. But instead of stimulating Britain’s economy, it nearly killed it, and with it, perhaps, the notion that supply-side economics (the theory behind the policies of Thatcher and Ronald Reagan) is a good option for the challenges of the 21st century. century.
The new package of economic measures measureswhich also remote a cap on the bonuses that bankers can receive, caused the pound sterling to spiral down to its lower never level against the US dollar. Pushed global stock markets to new yearly lows, required the Bank of England to buy £65 billion in government bonds and even drew criticism from the International Monetary Fund Y moody’s.
It was just the latest, and perhaps costliest, example yet of why the country’s decision to leave the European Union was truly an act of economic suicide. One wonders if the Canadian politicians who so vigorously encouraged voting at the time (Andrew Scheer, Jason Kenney and Pierre Poilievre) will finally put aside their populist pom-poms for good.
The Truss government finally reversed tax cut (ironically, only a day after she said she wouldn’t), but the damage to her reputation and to Britain’s economy had already been done. The Truss tax cuts are the latest, albeit the most spectacular example in recent memory of the high cost of cutting taxes for the wealthy.
So far, these examples have done little to dissuade conservatives from pursuing such policies. If anything, the belief that lowering taxes for the wealthy can attract investment, increase productivity, and increase government revenue remains a core part of conservative orthodoxy throughout the Western world. He kept many reluctant Republicans tethered to Donald Trump’s ideologically incoherent regime, and he delivered for them with his administration’s 2017 “Tax Cuts and Jobs Act,” a $2.3 trillion giveaway to corporations and high-income individuals.
At the time, Treasury Secretary Steven Mnuchin. reclaimed that “this tax plan will not only pay for itself, but also pay off the debt.” That’s a familiar promise routinely made (and subsequently broken) whenever Tories try to cut taxes for the wealthy.
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As Jim Tankersley pointed out in a recent article New York Times part, a pair of economists at the Urban-Brookings Tax Policy Center in Washington studied the impact of Trump’s tax cuts before COVID-19 and found them deeply flawed. “The cuts did little to promote job growth or investment outside the oil and gas sector, which is highly correlated with the global price of fossil fuels,” Tankersley wrote. “And they found that the cuts significantly reduced federal tax revenue, contrary to Republican promises that the cuts would pay for themselves by spurring additional economic growth.”
Princeton economist Owen Zidar to study, which covers decades of tax-related data in the United States, goes even further. “The stimulant effects of income tax cuts are largely driven by tax cuts for the bottom 90 percent,” he concludes, “and that the empirical link between job growth and changes in taxes for the richest 10 percent are weak or insignificant in a business. cycle frequency.
Translation: If you want to create jobs, cut taxes for the working and middle classes.
Opinion: Old habits die hard, and few habits are older for conservatives than promoting tax cuts for the wealthy, writes columnist @maxfawcett for @NatObserver.
But old habits die hard, and few habits are older for conservatives than promoting tax cuts for the wealthy. Witness the recent part in the toronto sun by Matthew Lau, associate scholar at the Fraser Institute, who took aim at the federal government’s plan to tax luxury goods. “Even if the goal of tax policy is to maximize government revenue, which it shouldn’t be in the first place, lowering the top earners’ income tax rate is probably a better idea than raising it,” he wrote.
This is the orthodoxy to which Lau, Truss, and Danielle Smith of the UCP subscribe: no matter the circumstance or context, cutting taxes on the rich is always a good idea.
Truss may have reason to question that logic, given that he could end up losing his job as a result of his failed attempt to cut taxes. But he can be sure that Canadian conservatives, whether it be Smith of the UCP or Poilievre of the CPC, will almost certainly ignore the lesson that Truss must learn.
The real question is who ends up paying the price for it, and how expensive it will be.