Difficulties of raising taxes

Interesting article by Ken Clarke – lamenting difficulty of raising taxes.

Basically, the general public want public spending in key areas, but don’t want to have any increase in taxes to pay for them.

  • Pensioners triple lock very expensive – but will be very difficult to challenge.
  • When people are used to receiving money, it is very difficult to take it away.
    “Electoral bribes, handing out money to people of all ages, has got out of hand. The trouble with electoral bribes is that they are damned difficult to take back because people do like being given money.”
  • Difficulty of home building. “the only thing that will rouse the passions of the English middle class is the suggestion that you may build anything within five miles of where they live” – this did smile because it’s absolutely true! My parents village were completely roused to block a new housebuilding project of 10 new houses in their village.

I don’t agree with many things in article. The chancellor only has himself to blame for exaggerating fears over levels of government borrowing. Current levels of austerity are unnecessary. But, it does illustrate difficulty of long-term economic planning.

Opportunity cost

An essential economic principle is the idea of opportunity cost. Spend more on health care, the opportunity cost is lower spending on education and / or higher taxes.

The opportunity cost of cutting taxes, is less money to spend on public services.

 

0 thoughts on “Difficulties of raising taxes

Leave a Reply

Your email address will not be published. Required fields are marked *