Friday, April 17, 2009
Higher taxes lower revenue
At some point taxation affects consumption, and when consumption drops the amount of revenue you receive with higher taxes becomes lower than you would receive with moderate taxation. The same is true for income tax, income taxes are ultimately covered by the purchase price, so to the consumer VAT and income tax both serve to raise prices and reduce consumption. Given the high level of taxation in the UK, I think the question should probably be asked, is the government already receiving peak revenue from the economy? Is it actually possible to raise more revenue from the UK without a) the disaster of reducing revenue and b) damaging the economy in the process. If not, then we are in bigger trouble than we thought.