ALEX BRUMMER: A new tax levy will hurt job creation and hurt business, entrepreneurship and savings – it takes too much from the economy too soon
- In the Anglo-Saxon economic model, penalizing employment is not a solution
- Companies can think twice before hiring people, like truck drivers, about improved wages if payroll taxes are increased
- The ability of a faster growing economy to generate higher tax revenues – without introducing new burdens – should not be underestimated
Britain’s much-heralded Freedom Day July 19 proved just the opposite. A host of factors – such as pingemia, supply chain issues, and a slowdown in vaccine rollout – caused production in July to fall well below market expectations, growing only $ 0. 1%.
This prompted city economists to search their Excel sheets, with Goldman Sachs cutting its third-quarter forecast from 2.6% to 1.4%.
The British Covid rebound looks much less elastic than expected. The uneven recovery comes at a delicate time. Much of the Covid-19 hourglass assistance ends.
Good economy? : In terms of sustaining growth, now may not be the right time to impose a £ 12bn tax burden on labor, as Chancellor Rishi Sunak might find out
The stamp duty relief, which ignited the housing market and supported the service and construction sectors, has disappeared.
Some 1.6 million people, still on leave, are waiting to be called back to full-time work and the £ 20 a week increase for needy households on universal credit ends on 6 October. The era of pandemic subsidies is drawing to a close.
It is important for every citizen that the shadow of social care and the funding needs of the NHS are taken into account.
But in terms of sustaining growth, this may not be the right time to impose a £ 12 billion tax burden on labor.
Companies and employees may have until next April to consider the tax shock, but in the Anglo-Saxon economic model, penalizing employment is not a solution.
If work is to be made more attractive and people currently classified as economically inactive are to be reintegrated into the labor market, they are unlikely to fill out application forms if they know the government is going to take back much of the money. wages. Additionally, companies can think twice before hiring people, like truck drivers, to improved wages if the payroll tax is increased.
George W Bush’s main economic response to September 11, exactly two decades ago, was a sharp cut in US payroll taxes. It was an incentive not to fire people and to hire new staff, as the economy crumbled in terror. It was a supply side initiative that helped boost production and employment.
The new NHS and social care levy ends any pretense that the UK after Brexit aims to be Europe’s Singapore. In the pipeline is a meteoric increase in corporate taxes from 19 percent to 25 percent. This despite the fact that George Osborne’s war on corporate taxation saw his revenues increase.
In addition, the increase in the taxation of dividends, which has accompanied the new government system, may seem attractive because it seems that the richest will be the hardest hit. But it’s also a big blow to the Reddit generation, first-time stock buyers, and other economies.
Because the Social Services and NHS fix was not a formal financial statement, the underlying arithmetic and impact on public finances will not be explained until next month’s budget. What we do know is that faster-than-expected growth since the March budget and tight spending by the department has already generated a borrowing under-spending of £ 25bn.
The ability of a faster growing economy to generate higher tax revenues – without introducing new burdens – should not be underestimated. Another concern, highlighted by the Institute for Fiscal Studies, is that “creating an entirely new tax will lead to even more unnecessary complexity.” It is also an open goal for a future chancellor to raise more income on behalf of the NHS if needed.
The distributive aspects of the 1.25% levy have been widely contested on the left.
Yet an analysis from the Treasury shows that the lowest income households will be the biggest beneficiaries of the package, and the 20 percent of the highest income households will contribute 40 times more than the low income cohorts.
Regardless of how it is viewed, however, the new levy will hurt job creation and hurt business, entrepreneurship and savings. It takes too much of the economy too soon.
There were moments of great honesty from Welsh Silicon Valley guru Michael Moritz at an event in London hosted by Buy Now, Pay Later Specialist Klarna (whom he chairs).
The Sequoia investor, who supported Google and Paypal among others, admitted to letting Elon Musk’s Tesla and Netflix slip through his fingers. He couldn’t really see why someone would bother with Netflix when they could go out on Blockbuster.
As for Musk’s other company, Space X.. . it’s a whole different ball of wax.