High 50p tax rate damages UK, say economists

[Denny Crane]

http://www.bbc.co.uk/news/business-14810323

Twenty high-profile economists have urged the government to drop the top 50p tax rate, which they say is doing "lasting damage" to the UK economy.

In a letter to the Financial Times, they say it should be axed "at the earliest opportunity" to boost growth.

It comes as Chancellor George Osborne says short-term economic forecasts for the UK have been revised downwards.

He has said the 50p rate on earnings over £150,000 - introduced by Labour - is only a temporary measure.

The chancellor has asked the Inland Revenue to check whether the 50p rate is an effective means of raising tax revenue.

Unions say the call to axe the 50p rate is "monstrously unfair" while spending cuts bite.

The 20 signatories to the FT letter include two former members of the Bank of England's Monetary Policy Committee (MPC), DeAnne Julius and Sushil Wadhwani.

It is part of a campaign being promoted through PR firm Westbourne, which they say is funded by businesses concerned about the impact of the 50p rate.

'Mobile people'

The economists state that the tax rate makes is making the UK "less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers".

 

[Denny Crane]

http://www.cnbc.com/id/44409176


CEOs to Obama: 'Get Out of the Way' for Job Growth

 

[BLAZER PROPHET]

And as one CEO stated: Jon Faraci, CEO of International Paper [IP 28.075 0.305 (+1.1%) ], told CNBC "to create jobs what we need is demand. This economy is 70 percent consumer driven, so we need consumers spending some of their discretionary income if we're going to have demand that's gong to lead to more jobs." "If we get demand, we’ll put more shifts on, our employees will be working more hours, and we’ll hire more people. Without demand we can have all the certainty in the world and all the clarity about regulation, but to me it’s not so much about confidence as it is about demand," explained Faraci.

And how do people get more discretionary income?

 

[Denny Crane]

At least 2M of the unemployed are satisfied to live off unemployment benefits. When those run out, they will find jobs that pay more.

 

[blazerboy30]

And as one CEO stated: Jon Faraci, CEO of International Paper [IP 28.075 0.305 (+1.1%) ], told CNBC "to create jobs what we need is demand. This economy is 70 percent consumer driven, so we need consumers spending some of their discretionary income if we're going to have demand that's gong to lead to more jobs." "If we get demand, we’ll put more shifts on, our employees will be working more hours, and we’ll hire more people. Without demand we can have all the certainty in the world and all the clarity about regulation, but to me it’s not so much about confidence as it is about demand," explained Faraci.

And how do people get more discretionary income?

Increase tax on the rich. Isn't that always the answer?

 

[BLAZER PROPHET]

Increase tax on the rich. Isn't that always the answer?

Sadly. Or maybe I should say, 'stupidly'.

 

[BrianFromWA]

they're asking to drop the 50% rate so that they can institute a 70% one, right?

 

[maxiep]

And as one CEO stated: This economy is 70 percent consumer driven, so we need consumers spending some of their discretionary income if we're going to have demand that's gong to lead to more jobs."

And how do people get more discretionary income?

This figure in this quote is the crux of the problem. Our economy needs to become more globally competitive and consume less so this 70% figure declines. Much of the 2000s has been driven by credit growth. That credit eventually needs to be repaid, which is what people are doing with their discretionary income right now. To become more globally competitive, we need to reduce energy costs and regulation. We also need to stop allowing ourselves to be dicked around by our trade "partners" who tariff our goods at a rate which makes our goods non-competitive.

We simply can't afford any more consumer growth based on credit, either publicly or privately.

 

[BLAZER PROPHET]

We simply can't afford any more consumer growth based on credit, either publicly or privately.

In theory good, but in practice we lack the ability.

 

[julius]

Increase tax on the rich. Isn't that always the answer?

works probably better then lowering taxes on them.

 

[Denny Crane]

The economy is growing, just very slowly. I think GDP is all-time high, so that 70% is having a growth effect.

The obvious example of ideological stupidity is the Boeing deal. We won't let the open new factories where they want in the USA. It won't be long before they just open the new factories in India. We deny ourselves access to our own resources (oil, etc.), so we have to import it at a premium.

 

[Denny Crane]

works probably better then lowering taxes on them.

No, it doesn't. If you graph GDP growth and % of GDP govt. spends, you'd see growth crawls as spending increases. Govt. spending is near it all-time high.

 

[blazerboy30]

works probably better then lowering taxes on them.

Just so you can re-read your theory...

You just said that: Increasing taxes on the rich will increase the discretionary spending of consumers more than lowering taxes on the rich.

You do realize how ridiculous that sounds, right?

Let's try another one...

"Injuring Lebron James and robbing him of his athleticism will make Joel Pryzbilla more athletic".

Wow.

 

[julius]

Just so you can re-read your theory...

You just said that: Increasing taxes on the rich will increase the discretionary spending of consumers more than lowering taxes on the rich.

You do realize how ridiculous that sounds, right?

Let's try another one...

"Injuring Lebron James and robbing him of his athleticism will make Joel Pryzbilla more athletic".

Wow.

sarcasm wasn't working very well today.

 

[barfo]

This figure in this quote is the crux of the problem. Our economy needs to become more globally competitive and consume less so this 70% figure declines. Much of the 2000s has been driven by credit growth. That credit eventually needs to be repaid, which is what people are doing with their discretionary income right now. To become more globally competitive, we need to reduce energy costs and regulation. We also need to stop allowing ourselves to be dicked around by our trade "partners" who tariff our goods at a rate which makes our goods non-competitive.

We simply can't afford any more consumer growth based on credit, either publicly or privately.

Reducing energy costs (how you going to do that?) and regulation isn't going to make us able to manufacture things as cheaply as the Chinese. We also have to drop wages drastically. And if you are going to turn the US into a polluted shithole where the workforce is paid peanuts, why not save the trouble and just move to China?

Basic manufacturing is gone and it isn't ever coming back, unless our wages drop to the level of third-world countries. We need to concentrate on what can't be done overseas (flipping burgers) and what maybe we can do better than they can do overseas (design, invention).

barfo

 

[maxiep]

In theory good, but in practice we lack the ability.

Huh? It's simple. Tighten the money supply, and you drive up interest rates. It squeezes inflation from the system and raises the cost of borrowing. It's what Voeckler did in the late 70s/early 80s to get us out of the Carter malaise. The tough part is it means experiencing another deep and painful recession.