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sossij

Tax Cuts And The Public Sector

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Ok, I've been thinking (risky, I know!). Recently we have heard how the public sector has increased by 63% since Blair, Brown and Darth Mandelson took office in 1997. In light of the economic downturn that we now find ourselves in, one proposed (partial solution) has been the suggestion of tax cuts, the (hoped for) effect of which would be to increase consumer spending thus give the economy a shot in the arm.

Now it occurs to me that there is a problem with this amplified by the fact that we have a very large public sector. Apart from borrowing, the only source of revenue for the government is from taxation of the private sector. All government employees are paid from this pot of money with the subsequent illusion that they too are taxed. I contend that the so called deduction of tax from public sector workers does not really exist - in effect public sector nett, not gross, salaries are what is deducted from the public purse. There is no paying back of a (secondary) tax take from the public sector (wouldn't that be a be akin to double counting - first the tax from the private sector and then from the public sector?) Therefore, if tax cuts are introduced for both the private and public sector, it will result in an increase in the demand on the state purse to pay for the now higher public sector salaries which will need to be paid for from....?

Therefore I suspect the effect of any tax cuts will be hindered unless we have a reduction in the size of the public sector. Comments?

Edited by sossij

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Your trying to accuse Brown of accounting fraud? :lol::lol::lol:

Thatcher sold of houses to make everyone vote for her, you wouldn't want to risk Labour would you and lose your home.

Labour have just increased the public sector in the vain hope they won't vote them out and risk losing there jobs.

Gerrymandering at it's best and no one gets prosecuted for it.

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I agree with the sentiment of what you are saying - the private sector is in effect paying both public sector wages and taxes, therefore it is illusory.

As for tax cuts... have you seen the bill Gordo is going to leave us?

We most definitely need a much smaller state; genuine wealth creating* industry needs to be allowed to flourish and grow.

The problem is that the public sector is so big now, cutting it for politicians sans balls is going to be very difficult and politically dangerous.

* as opposed to the politically favoured get-rich-quick, Ponzi style scams that actually take money out of the economy.

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Guest absolutezero
Ok, I've been thinking (risky, I know!). Recently we have heard how the public sector has increased by 63% since Blair, Brown and Darth Mandelson took office in 1997. In light of the economic downturn that we now find ourselves in, one proposed (partial solution) has been the suggestion of tax cuts, the (hoped for) effect of which would be to increase consumer spending thus give the economy a shot in the arm.

Now it occurs to me that there is a problem with this amplified by the fact that we have a very large public sector. Apart from borrowing, the only source of revenue for the government is from taxation of the private sector. All government employees are paid from this pot of money with the subsequent illusion that they too are taxed. I contend that the so called deduction of tax from public sector workers does not really exist - in effect public sector nett, not gross, salaries are what is deducted from the public purse. There is no paying back of a (secondary) tax take from the public sector (wouldn't that be a be akin to double counting - first the tax from the private sector and then from the public sector?) Therefore, if tax cuts are introduced for both the private and public sector, it will result in an increase in the demand on the state purse to pay for the now higher public sector salaries which will need to be paid for from....?

Therefore I suspect the effect of any tax cuts will be hindered unless we have a reduction in the size of the public sector. Comments?

But surely the public sector doesn't cost as much as you think.

If 5 public sector employees pay tax at 20% it pays for a sixth employee... ;)

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The best solution that I have heard of is to cut all public sector salaries by approx 25% and give them a pension with similar benefits to the private sector.

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Guest absolutezero
The best solution that I have heard of is to cut all public sector salaries by approx 25% and give them a pension with similar benefits to the private sector.

You've mentioned the P word.

What are the odds this turns into a pension envy debate....? :rolleyes:

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The best solution that I have heard of is to cut all public sector salaries by approx 25% and give them a pension with similar benefits to the private sector.

Would it be better to have graded wage cuts with smaller % cuts in wages for low earners, with bigger cuts for higher end wage bracket. maybe with a cap of £100k for all public sector workers.

This in addittion to jobs actually being cut as well.

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Would it be better to have graded wage cuts with smaller % cuts in wages for low earners, with bigger cuts for higher end wage bracket. maybe with a cap of £100k for all public sector workers.

This in addittion to jobs actually being cut as well.

I should imagine any changes will be made so as not to interfere with the interests of those making the decisions

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The 63% rise in the size of the public sector since 1997 is not inflation-adjusted and is entirely disingenuous, as I'm sure the OP knows. The public sector share of GDP rose from 39% of GDP in 1997-8 to 42% in 2008-9 and is below that of most Western European countries. The PFI contracts awarded up to 2007 (including those started under the Major government) were estimated to be worth £68bn by the Financial Times. That's not nothing, but these are large infrastructure contracts spread over years and will only bump up the % of GDP figure by a few percent at most. Certainly public sector cuts are coming (and needed), but it doesn't help to be dishonest about the scale of the problem.

Edited by bearly legal

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