There is no reason to raise VAT
4 January 2011
SUGGESTED
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4 January 2011
Uncategorized
4 January 2011
Government and Institutions
It is very clear that the government cannot carry on borrowing at current rates and the coalition’s proposals for reducing government borrowing are prudent. However, today’s VAT rise is unnecessary.
As has been said before, we did not get into this situation because the government taxes us too little. Ever since Gordon Brown abandoned his self-imposed restraint in 2000, government spending, financed mainly by stealth taxes and increased borrowing, has expanded rapidly to its current level of over 50 percent of national income. As such the whole of the balance of fiscal adjustment should come through spending cuts.
Read the rest of the article on the Spectator Coffee House blog.
As has been said before, we did not get into this situation because the government taxes us too little. Ever since Gordon Brown abandoned his self-imposed restraint in 2000, government spending, financed mainly by stealth taxes and increased borrowing, has expanded rapidly to its current level of over 50 percent of national income. As such the whole of the balance of fiscal adjustment should come through spending cuts.
Read the rest of the article on the Spectator Coffee House blog.
3 thoughts on “There is no reason to raise VAT”
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I agree that cuts are necessary in order to bring down the deficit. But how can anyone advocating cutting the winter fuel allowance sleep at night knowing that pensioners will die as a result of such a move?
The winter fuel allowance is not an allowance for winter fuel. It is a flat payment paid regardless of how poor a household is, how much fuel is consumed and how cold it is. There are separate payments for poor households in extreme cold weather. Abolishing the payment will reduce pensioners’ incomes but then their incomes are set to grow in real terms whilst workers’ real incomes are shrinking. Also, what is the sense in raising taxes in order to see that money passed to another bureaucrat and handed back as a benefit? Everybody living at the expense of everybody else as Bastiat put it.
Italian government raised VAT to 21%. Here the problem: why not considering the theory of social network of Strogatz as mathematical reason against this provision? The theory forecasts that an attack (fiscal in this case) against the hubs (enterprises and businessman) of a social network (economy network) can make the network collapse.