Tax Cuts for the Poor, Tax Hikes for the Rich
It is the same old in Great Britain; trade unions are calling on the Labor-led government to cut taxes for low income families and raise them for the rich. After all, these unions argue, lower income households need the extra money in difficult times.
The calls from the unions come at a time when Gordon Brown’s administration is trying to deal with a severe economic downturn. Him being a laborite makes it likely that he will soon do what the unions ask him to do; after all, his political power depends on them.
Such an approach, however, has been tried in the past, and it has yet to work. Cutting taxes for low income households does zero to nothing for the economy as a whole. After all, when the poor have a few more bucks to spend, they do not spend the extra money on consumer products. Instead, they simply choose a more expensive brand of peanut butter, or bread.
Not exactly the kind of products economic growth depends on.
Higher income households however – because the ‘rich’ in socialist countries such as England does not mean ‘the rich’ but merely those who earn a good living – do spend the extra money they would receive from tax cuts on products that actually help revive the economy. When they have more money to spend, they buy that newest cell phone, or iPod. They buy a bigger and better home, a brand new car… Not a new car to replace the old one, but one extra. For shopping. For the wife.
In short, the unions have it all wrong, as usual.
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