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Post by Pacifico on Jan 14, 2024 18:20:07 GMT
Is anyone really suggesting a 25% increase on the basic rate? - people don't want to pay an extra 1% for the State Religion (the NHS). I can just imagine the uproar if you put the basic rate up to 25% Yes. That's the point. A 6% increase in interest rate means people with mortgages having to find £800 a month more. (Averaged) So why would a £100 monthly increase for the lowest tax payer and a £2,000 increase for the highest be so crazy?
I suggest it would only cause uproar by those are not affected by the mortgage rate and wish to be excused the pain of those who carry the burden for them. I have already explained that - the highest do not spend all their income on on goods and services, they also save and invest. So increasing income tax for the rich does not dissuade from consumer spending as they can just reduce outgoings in other areas - you are not targeting the cause of inflation which is excess demand. The purpose is to take money out of the economy - interest rates do that, income tax may or may not. |
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Post by Pacifico on Jan 14, 2024 18:23:46 GMT
Maybe the BofE should be given the extra lever of income tax levies Giving an unaccountable organisation control over tax rates is not compatible with a democratic society. Who do you vote for if you want higher or lower taxes? |
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Post by buccaneer on Jan 14, 2024 22:49:49 GMT
Like I said before, you think you've got the silver bullet to a very complex problem. I think I have the starting point for an idea that its opponents seem unable to address without resorting to distortions and straw men. It is only the basis for discussion and whether it is a reasonable suggestion or not depends on the pros and cons as it is placed under the microscope of examination. But the fact that thus far no one here seems to be able to come up with a strong logical objection without first misrepresenting it with the aid of some sort of set of ideological goggles, is itself rather telling right now. When times are tough you want the government to take over monetary policy. This isn't possible as it is the job of the central bank to provide a nation its currency and price stability by controlling inflation. They control the cost of borrowing and lending throughout the economy and do this independently of any political interference. Central banks perform open market transactions - buying and selling securities and by selling securities it can take money out of circulation by raising interest rates. This having your cake and eating it notion (using a central bank in good times and a government takeover in bad times) wouldn't work in the global banking system and they wouldn't be able to regulate commercial banks. If the government took over monetary policies and took this macroeconomic and microeconomic lever away from central banks then in theory commercial banks could set low interest rates during times of inflation to ensure perpetual borrowing and thereby circulating too much money into the system aiding inflation. Banks would have to come under government control. You want a managed system in bad times, and a free market in good times. You can't just pick and choose when to have a communist style banking system in the bad times and a capitalist one in the good times, picking and choosing the system you want because you still get inflation in both. Also, central banks have generally been more successful in reaching price stability than central banks under government control. You want governments in the short term to tax their way to growth and out of inflation without them knowing the consequences of long-term inflation. If mismanaged this tax could become semi-permanent and commercial banks could be selling loans at low interest rates for years causing doom loops. |
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Post by Deleted on Jan 14, 2024 23:56:59 GMT
Interest rates do not hit the whole economy. They enrich parts of it enabling even more spending, whilst hitting other parts hard, whilst leaving many other parts entirely unaffected. In terms of suppressing demand, spreading the load more widely and fairly would be far more effective. It therefore stands to logical reason that if a certain level of interest rates are necessary to suppress demand, increasing the spending power of some whilst entirely unaffecting many others in the process, the same effect could be achieved by spreading the load much more widely whilst enriching no one, with a much less substantial raise. Of course Interest rates hit the whole economy - they also hit the business sector which is something that a rise in Income Tax would fail to do. By hitting every sector of the economy higher interest rates can suppress demand for all economic growth, which is precisely why the rich do not like high interest rates. Tax rises instead of interest rates would suppress demand more effectively because more people pay and no ones income gets boosted. And you are right that taxes dont hit businesses in the same way that interest rates do. But we dont want them to surely if we want businesses to be able to expand to match supply, thereby reducing supply side inflationary pressures.. I explained that earlier. |
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Post by Deleted on Jan 15, 2024 0:00:14 GMT
Maybe the BofE should be given the extra lever of income tax levies Giving an unaccountable organisation control over tax rates is not compatible with a democratic society. Who do you vote for if you want higher or lower taxes? Yet that is exactly what we do with interest rates. So again it is not the lack of so called control that is your real issue, just your dislike of an income levy being used instead of interest rate rises. |
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Post by Deleted on Jan 15, 2024 0:04:42 GMT
I think I have the starting point for an idea that its opponents seem unable to address without resorting to distortions and straw men. It is only the basis for discussion and whether it is a reasonable suggestion or not depends on the pros and cons as it is placed under the microscope of examination. But the fact that thus far no one here seems to be able to come up with a strong logical objection without first misrepresenting it with the aid of some sort of set of ideological goggles, is itself rather telling right now. This isn't possible as it is the job of the central bank to provide a nation its currency and price stability by controlling inflation. They control the cost of borrowing and lending throughout the economy and do this independently of any political interference. Central banks perform open market transactions - buying and selling securities and by selling securities it can take money out of circulation by raising interest rates. This having your cake and eating it notion (using a central bank in good times and a government takeover in bad times) wouldn't work in the global banking system and they wouldn't be able to regulate commercial banks. If the government took over monetary policies and took this macroeconomic and microeconomic lever away from central banks then in theory commercial banks could set low interest rates during times of inflation to ensure perpetual borrowing and thereby circulating too much money into the system aiding inflation. Banks would have to come under government control. You want a managed system in bad times, and a free market in good times. You can't just pick and choose when to have a communist style banking system in the bad times and a capitalist one in the good times, picking and choosing the system you want because you still get inflation in both. Also, central banks have generally been more successful in reaching price stability than central banks under government control. You want governments in the short term to tax their way to growth and out of inflation without them knowing the consequences of long-term inflation. If mismanaged this tax could become semi-permanent and commercial banks could be selling loans at low interest rates for years causing doom loops. No I want the bank of England or some such arms length organisation to have the remit to control inflation as it does now. I just think it should have the ability to use a levy on incomes instead of interest rate rises, for all the reasons previously set out and in no effective way challenged thus far without recourse to straw men. |
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Post by Equivocal on Jan 15, 2024 3:28:11 GMT
No I want the bank of England or some such arms length organisation to have the remit to control inflation as it does now. I just think it should have the ability to use a levy on incomes instead of interest rate rises, for all the reasons previously set out and in no effective way challenged thus far without recourse to straw men. To be fair, I think Buccaneer has provided you with a substantive counter argument. Put more simply; if interest rates are 2% and inflation is running at 12%, then there is a clear incentive to borrow. Increased borrowing increases money supply thereby increasing aggregate demand and producing a counter inflationary force against the deflationary force from the temporary increase in taxation. Similarly, savers will be incentivized to bring forward purchases to avoid inflationary increases, again increasing aggregate demand. (The risks associated with a sudden uptick in consumer borrowing are well known.)
The issue of the inflationary pressure on imported goods would also need to be factored in to any model if the UK were to maintain low interest rates while the rest of the world increased theirs. It would certainly increase the price of many foods, most other consumer orientated products and many of the components used in industrial production.
As an aside, the effect of VAT increases are similar to income tax increases in making goods and services more expensive. The former increases the difference between income and price by increasing the price of the product while the latter increases the difference by reducing income.
I can see that you are searching for a system that allocates the pain of anti inflationary measures more equitably, and I am with you. I think, however, without controls on several other areas of the economy being implemented (each having its own side effects), temporarily increaing income or purchase tax is unlikely to be successful.
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Post by buccaneer on Jan 15, 2024 6:43:13 GMT
When times are tough you want the government to take over monetary policy. This isn't possible as it is the job of the central bank to provide a nation its currency and price stability by controlling inflation. They control the cost of borrowing and lending throughout the economy and do this independently of any political interference. Central banks perform open market transactions - buying and selling securities and by selling securities it can take money out of circulation by raising interest rates. This having your cake and eating it notion (using a central bank in good times and a government takeover in bad times) wouldn't work in the global banking system and they wouldn't be able to regulate commercial banks. If the government took over monetary policies and took this macroeconomic and microeconomic lever away from central banks then in theory commercial banks could set low interest rates during times of inflation to ensure perpetual borrowing and thereby circulating too much money into the system aiding inflation. Banks would have to come under government control. You want a managed system in bad times, and a free market in good times. You can't just pick and choose when to have a communist style banking system in the bad times and a capitalist one in the good times, picking and choosing the system you want because you still get inflation in both. Also, central banks have generally been more successful in reaching price stability than central banks under government control. You want governments in the short term to tax their way to growth and out of inflation without them knowing the consequences of long-term inflation. If mismanaged this tax could become semi-permanent and commercial banks could be selling loans at low interest rates for years causing doom loops. No I want the bank of England or some such arms length organisation to have the remit to control inflation as it does now. I just think it should have the ability to use a levy on incomes instead of interest rate rises, for all the reasons previously set out and in no effective way challenged thus far without recourse to straw men. Pacifico has already rebutted your idea of a third party organisation helping themselves to people's taxes. That's not how democracy works. |
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Post by jonksy on Jan 15, 2024 7:17:03 GMT
No I want the bank of England or some such arms length organisation to have the remit to control inflation as it does now. I just think it should have the ability to use a levy on incomes instead of interest rate rises, for all the reasons previously set out and in no effective way challenged thus far without recourse to straw men. Pacifico has already rebutted your idea of a third party organisation helping themselves to people's taxes. That's not how democracy works.
We can expect no more from an ardent supporter of the EUSSR mate. |
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Post by zanygame on Jan 15, 2024 7:26:36 GMT
No I want the bank of England or some such arms length organisation to have the remit to control inflation as it does now. I just think it should have the ability to use a levy on incomes instead of interest rate rises, for all the reasons previously set out and in no effective way challenged thus far without recourse to straw men. To be fair, I think Buccaneer has provided you with a substantive counter argument. Put more simply; if interest rates are 2% and inflation is running at 12%, then there is a clear incentive to borrow. Increased borrowing increases money supply thereby increasing aggregate demand and producing a counter inflationary force against the deflationary force from the temporary increase in taxation. Similarly, savers will be incentivized to bring forward purchases to avoid inflationary increases, again increasing aggregate demand. (The risks associated with a sudden uptick in consumer borrowing are well known.)
The issue of the inflationary pressure on imported goods would also need to be factored in to any model if the UK were to maintain low interest rates while the rest of the world increased theirs. It would certainly increase the price of many foods, most other consumer orientated products and many of the components used in industrial production.
As an aside, the effect of VAT increases are similar to income tax increases in making goods and services more expensive. The former increases the difference between income and price by increasing the price of the product while the latter increases the difference by reducing income.
I can see that you are searching for a system that allocates the pain of anti inflationary measures more equitably, and I am with you. I think, however, without controls on several other areas of the economy being implemented (each having its own side effects), temporarily increasing income or purchase tax is unlikely to be successful.
That does assume tax levies replace interest rates entirely. For myself can I say that was never my intention, I felt it was a way of making the tool less blunt. Oh and POI Interest rates in Germany currently sit at 2.8% almost half the UK. |
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Post by jonksy on Jan 15, 2024 7:30:39 GMT
Brexit victory as huge UK manufacturer goes on hiring spree in key sign of boom...
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Post by Pacifico on Jan 15, 2024 9:21:07 GMT
Giving an unaccountable organisation control over tax rates is not compatible with a democratic society. Who do you vote for if you want higher or lower taxes? . So again it is not the lack of so called control that is your real issue, just your dislike of an income levy being used instead of interest rate rises. No we don't - it is the elected government that gives the BoE the mandate to keep inflation at 2%. The only tool the BoE has that can affect the inflation rate is interest rates - but they elected government could remove that mandate at any time. |
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Post by buccaneer on Jan 15, 2024 10:02:58 GMT
To be fair, I think Buccaneer has provided you with a substantive counter argument. Put more simply; if interest rates are 2% and inflation is running at 12%, then there is a clear incentive to borrow. Increased borrowing increases money supply thereby increasing aggregate demand and producing a counter inflationary force against the deflationary force from the temporary increase in taxation. Similarly, savers will be incentivized to bring forward purchases to avoid inflationary increases, again increasing aggregate demand. (The risks associated with a sudden uptick in consumer borrowing are well known.)
The issue of the inflationary pressure on imported goods would also need to be factored in to any model if the UK were to maintain low interest rates while the rest of the world increased theirs. It would certainly increase the price of many foods, most other consumer orientated products and many of the components used in industrial production.
As an aside, the effect of VAT increases are similar to income tax increases in making goods and services more expensive. The former increases the difference between income and price by increasing the price of the product while the latter increases the difference by reducing income.
I can see that you are searching for a system that allocates the pain of anti inflationary measures more equitably, and I am with you. I think, however, without controls on several other areas of the economy being implemented (each having its own side effects), temporarily increasing income or purchase tax is unlikely to be successful.
That does assume tax levies replace interest rates entirely. For myself can I say that was never my intention, I felt it was a way of making the tool less blunt. Oh and POI Interest rates in Germany currently sit at 2.8% almost half the UK. That's because Germany is in a recession. |
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Post by jonksy on Jan 15, 2024 10:08:32 GMT
That does assume tax levies replace interest rates entirely. For myself can I say that was never my intention, I felt it was a way of making the tool less blunt. Oh and POI Interest rates in Germany currently sit at 2.8% almost half the UK. And no end in sight for Germany recession.
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Post by buccaneer on Jan 15, 2024 10:51:17 GMT
That's because Germany is in a recession. And no end in sight for Germany recession.
Yep, it's not looking good over there for them. I blame Brexit.  |
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