Why Are The Recent Tax Cuts Described As "Unfunded" In The Media?

[Kardashev]

Surely the money that is not taken in tax will largely be spent on things that have VAT, duty etc on them and therefore end up in the treasury anyway.

[Gromit]

The Government pays for things using the money it collects from income tax.
By cutting tax they expect to collect £50Billion less.
Which is fine, except they are still budgeting to spend the £50Billion they haven’t got.

So they go to the magic money tree and get £50Billion. Exactly what they said the Conservatives wouldn’t do, and what they said an irresponsible Labour Government would do.

[Kardashev]

some interesting food for thought, thank you all.

[Old_Geezer]

One can accept the USD may well have effects, but the question is how much compared to other influences. I'd have thought it has minimal contribution to a discussion on tax cuts here, although granted I only read a few paragraphs of what seemed an, unrelated to this thread, article.

[ToraToraTora]

gromit that would be true if every pound given back was spent on something that was duty free. I think the OP has a point a lot of it will be spent on things that attract duty+VAT so they may not be fully funded but they are certainly not "unfunded".

[youngmafbog]

Gromit, you still dont get it do you.

You cannot just take the tax cut and say the Government will be that much less. There is far more to the equation.

[ToraToraTora]

"Gromit, you still dont get it do you." - there are none so blind as those that will not see.

[youngmafbog]

OG, I posted it in response to other posters questioning that the City dont know what I posted. Which clearly they do.

If you do read the article it does show how the Dollar (they refer to it as the greenback) affects the World. The price of things is very much in the fore front when discussing tax cuts. As I said above the equation to understand/gamble the future is not straightforward.

Even a basic understanding of Economics, which so clearly many lack on here, would tell you this.

[FatticusInch]

ToraToraTora
//"Gromit, you still dont get it do you." - there are none so blind as those that will not see.//

ROFPMSL!

[youngmafbog]

I rest my case.

[Deskdiary]

Article by Matthew Lynn in the Telegraph on unfunded tax cuts, which makes for interesting reading.

https://www.telegraph.co.uk/business/2022/09/30/no-thing-unfunded-tax-cuts-money/

[Unfunded tax cuts] "It isn’t spending. It is simply taking less of your citizen’s money. It is state spending that needs to be ‘funded’, and not its opposite - and until we get that straight, and change the language we use, we will never be able to have a grown-up debate about how to manage our economy."

[Untitled]

The tax cuts are expected to create a £60bn shortfall... it is possible that slightly more vat payments could plug that enormous gap but it's not guaranteed as many beneficiaries of the tax cuts will choose to save considering that interest rates are high...

it's accurate to call them unfunded... the government is reducing its revenue by an amount that can't easily be funded with spending cuts (and they keep saying implausibly that they won't make those...) even if they expect it to be funded by growth those gains will be years away if they come at all

"trickle down" economic theory was all the rage in the 80s but it doesn't work... the wealth freed up by tax cuts tends to accumulate at the top.

[youngmafbog]

And another one that doesnt understand the full picture, or doesnt want to for political reasons.

[Untitled]

what do you think i am missing?

[youngmafbog]

This isnt the full picture either and a bit simplified but it does serve to illustrate that cutting taxes does not necessarily cause a decrease in income.

Unless you think Forbes dont know what they are talking about of course.

https://www.forbes.com/sites/mikepatton/2012/10/15/do-tax-cuts-increase-government-revenue/?sh=6aaf72634bf2

[Untitled]

https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Causes-and-Consequences-of-Income-Inequality-A-Global-Perspective-42986


"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."

[Untitled]

the forbes graph mixes correlation and causation... you would expect tax receipts to grow in a period of general economic expansion

[Gromit]

The Tories have done exactly what they accused Labour would do if they won the General Election.
They have borrowed a vast amount of money to pay for services. Instead of getting the economy booming, and then taxing from the increased productivity and sales to fund their budget commitments, they are cutting taxes and paying for everything on the tick.
Everything you accused McDonnell of 3 years ago, the Tories are now doing in heaps.

A typical AB comment from a few years back…

// I wonder how many labour voters, particularly students, believe in Corbyns magic money tree.
Yes he would bankrupt the country, yes he would allow countless unskilled migrants to flood our streets //

[Old_Geezer]

Interest rates are not high, and haven't been for ages. They are simply not as miserably abusively low as they have been.

[ichkeria]

“Surely the money that is not taken in tax will largely be spent on things that have VAT, duty etc on them and therefore end up in the treasury anyway.”

You are plainly one of life’s optimists :-)

[Old_Geezer]

It's a reasonable description. If you get a smaller income (say from tax cuts) then things that used to have resource to fund then are now left short. So the choice of reducing income from tax has not been funded by getting replacement incoming from elsewhere to replace it.