Monday, November 24, 2008

 

Of Crises, Tax Giveaways and Tax Increases

I've always been a bit suspicious of the Chinese proverb 'May you live in interesting times'; World War II was certainly interesting but I'm quite pleased, on reflection, that I was born after it and not before. Surviving that conflict must have made everyone feel like the heroes they certainly were, but history shows survival of such 'interesting' crises is not by any means the inevitable outcome. So the current financial crisis, seen by some commentators as the biggest threat to our normal life since that last worldwide conflict, is a delicate matter to assess.

Max Hastings today is pleased we have a leader who, like Churchil in 1940, seems to relish the challenge and seems happy to be out front taking the major decisions. Meanwhile Jackie Ashley notes that David Cameron and his friend George, seem to be fumbling for a coherent approach which has seen them renege on the earlier 'Compassionate Conservative' agenda which won them popularity. They seem to have reverted to more traditional Tory positions, while gambling on catastrophe rather than recovery.

We'll hear about the 'fiscal stimulus' today from Darling; it will comprise a mixture of giveaways on VAT and a brand new tax on those earning over £150,000 of whom there are some half a million in the UK. They won't like it at all but I sense that the antipathy to any tax increases which deterred New Labour, mindful of the 'double whammy' disaster in 1992, has not survived the onset of this parlous economic situation. The rich have been resented thoughout Labour's sojourn in power and, as the public believe that it has been rich, greedy people who started this whole thing, I suspect the extra 5% will not be generally unpopular.

But raising £15bn as a 'stimulus' and clearing a debt next year expected to be £120bn are connected- tenuously it seems to me- by the aspiration that the stimulus will kick start the economy and the flow of revenue into government coffers. The tax on the rich will only bring in £1.2bn- a trifling amount compared with the scale of the debt. Hastings concludes his piece with the comment: "We are still only in the first chapter of this horror story."

Comments:
I think 'may you live in interesting times' was used as a curse
 
Hughesey
It may prove to be so in this case too
 
Why didn't he tax 'em at 60% while he was about it? If you're going to annoy a lot of rich people for sheer tokenism (this isn't going to raise much money, so that's all it is) why not make a thorough job of it and actually sting them for some serious cash?

It's not going to help the economy, and it's going to saddle my generation with colossal debts that will probably cripple us financially. Thank you very much for nothing Mr. Darling.
 
Why not 60%? Because they will leave (Einstein), and take their money with them. My company(in the Middle East) has just started a new recruitment drive. We have been literally deluged with applications from the UK. These people are skilled and pay a lot of UK tax(am glad I don't). And the UK will lose a lot of them. And it is high taxes that will bring them here. 45% should persuade a few more. I really thought Britain had got past these days, and had understood that socialism doesn't work. It appears not.

A deficit of 115 billion next year is incredible. Wen't even started the recession yet. The question a lot of people should be asking, is why weren't we in surplus when the good times were rolling? We were running 50 billion at the height of a boom.

The pound will get slaughtered(suits me), long term interest rates will go up, and future generations will pay for this for years. If the British people even think about re-electing this irresponsible shower then they deserve their fate.

Dave(who I have absolutely no faith in) needs to reverse these tax rises, get a grip of the deficit and start articulating a vision quick. If he doesn't then and many others won't bother retaining our memberships.
 
Michael
Not sure people on £150,000 will leave. So many of them will have nice houses and kids in good schools and they'll love the life of the Home Counties. Most will grumble but, I reckon, most will stay.
 
Skipper

Quite. £150k is a threshold high enough to only affect those who have plenty of spare income anyway. The millionaires may go, but as they never pay income tax anyway, where's the difference? So why not make them pay a bit more while he's about it?

Who said New Labour had suddenly gone socialist? Socialists were thrifty people who liked to get people out of poverty, not profligate ones who decided at random to put people into it with massive debt!
 
Sorry to break it to you, but 150k a year is not a huge salary these days. And you overestimate the attachment of these people to the UK and its 70's style economy. Higher taxes creating disincentives to earn(and these days to pay tax) are basic economic theory. This change will be barely credit neutral. You may say "it's only 5%". But I say it is only 1.2 billion(before disicentives kick in - ie nothing).
 
Sorry to break it to you, but 150k a year is not a huge salary these days. And you overestimate the attachment of these people to the UK and its 70's style economy. Higher taxes creating disincentives to earn(and these days to pay tax) are basic economic theory. This change will be barely credit neutral. You may say "it's only 5%". But I say it is only 1.2 billion(before disicentives kick in - ie nothing).
 
Michael
£ 150K might not seem so much these days to bankers, brokers City accountants etc, but to those on median incomes of only 23K it's an annual king's ransom. Only 10% ofd trhe popuylation get over 40K a year so it IS a big salary in comparative terms.
 
I was going to jump in and point out that this is a curse, but see that Mr Hughes has beaten me to it.

I was also going to show off by pointing out that there is some doubt as to whether really it really is of Chinese origin, the earliest citation being a science fiction story from 1950. There's evidence Kennedy popularised it and some claim it’s the first of a series of three curses the next two being: 'may you come to the attention of the authorities' (which is more obviously sinister) and 'may you find what you are looking for'.
 
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