Anti-growth coalition?

I learned this phrase from British ex-Prime Minister Liz Truss.

What drives growth? Cutting tax? Liz Truss said people who against her tax cutting mini budget is anti-growth. 😊

It all depends on whose taxes are cut and whether and how to balance the budget. Some believe that if business taxes are cut, business can invest the extra money into business. However, many corporations will just increase dividends or buy back shares which can increase shareholder values directly. That is the ultimate goal of business that trumps everything. Cutting taxes for small businesses might drive more growth than cutting it for big corporations however, usually the latter have much more lobbying power. Same is applicable to individuals. Cutting tax for the middle class or below can drive more growth than cutting it for the rich because the former will put the savings right back into consumption because they have much tighter budget.

Also, cutting taxes while avoiding deficit usually means cutting government spending on social programs that grass root people uses. This austerity will tighten the purse strings for majority of the consumers. 75% of economy is driven by consumers. That is going to hurt the economy.

It is so much complicated than the simple notion to equal cutting tax to stimulating economic growth.

I am wondering whether most of us are mainly driven by ideology or emotion. Some hates taxes because they think it is unfair that they work hard to subsidize people who don’t work as hard. The left considers the conservatives lack of compassion.

Growth is from productivity that can be from investment in education, technology, infrastructure, new industries, and etc. Right amount of support and regulation from government. Free market fundamentalist leads to the 2008 financial crises.

Perhaps a balanced approach with private and public mix and cooperation is the way to go.

Can’t wait to see the new economic plan from Rishi Sunak’s new government.

Published by Worthfy

Financial literacy and counselling

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