When “we raise taxes to pay for spending” is your axiom, what you deduce from it is misguided.
Fiat currency is its issuer’s liability. (Confirm by checking the central bank’s balance sheet). Revenue is liability redemption non-funding, not pseudo-commodity transfer funding.
Taxes function to provide automatic stabilisers, decrease inordinate wealth and power, influence behaviour, and remove inflationary competition for limited resources that govt seeks to purchase - but not to fund the issue of govt financial liabilities.
Consumption and production are two sides of the same coin. You can quibble about the deadweight costs of VAT but they exist and they are significant. The effects of a regressive tax can be balanced by increases in income tax, but that's even more deadweight added.
Most taxes produce undesirable side effects. So why chose to get our revenues from those sources when others exist? The fact we don't hobbles the economy as well as baking in excessive inequalities, resulting in symptoms like the housing crisis.
When “we raise taxes to pay for spending” is your axiom, what you deduce from it is misguided.
Fiat currency is its issuer’s liability. (Confirm by checking the central bank’s balance sheet). Revenue is liability redemption non-funding, not pseudo-commodity transfer funding.
Taxes function to provide automatic stabilisers, decrease inordinate wealth and power, influence behaviour, and remove inflationary competition for limited resources that govt seeks to purchase - but not to fund the issue of govt financial liabilities.
benjamin weenenjust now
Consumption and production are two sides of the same coin. You can quibble about the deadweight costs of VAT but they exist and they are significant. The effects of a regressive tax can be balanced by increases in income tax, but that's even more deadweight added.
Most taxes produce undesirable side effects. So why chose to get our revenues from those sources when others exist? The fact we don't hobbles the economy as well as baking in excessive inequalities, resulting in symptoms like the housing crisis.
Raising VAT can mean less spending and slower economy. There is no reason to rush a tax rise as Government borrowing is at historic lows.