Post lockdown, cutting taxes is the only option

History has shown that the only way to get the economy back on track is with tax cuts, while increasing taxes is counterproductive, argues Will Jenson 

It's time to put tax cuts back on the table.

Lower taxes are, economically, a good thing for individuals and the Government. They help stimulate the economy, attract investment, create more (and higher paying) jobs, increase productivity and make the country as a whole better off, while increasing the tax take.

While, obviously, it depends on which taxes are cut (although, correlation between lower taxes generally and higher growth exists), and it is true that tax cuts benefit those that pay the most tax, as opposed to those that pay no tax (which, seems, fair enough), it is not only true that tax cuts just benefit the rich.

While Covid-19, and the current lockdown, is costing the country billions a month, it needs to be remembered that this money will need to be paid back, and that it's going to require a vibrant economy to get the deficit back under control.

This does not however mean, that the Government need to defer to the tax hike lobby, especially given that the current tax take is already at a decades long high. In fact, in the UK, citizens are actually paying an unsustainable level of tax, from income and VAT, to property taxes which are some of the highest in the developed world.

It is this high tax burden, not a lack of taxes being high enough, which will hamper the economic recovery this country will need once the lockdown is lifted. History has shown that cutting taxes leads to higher tax takes, because of the increases in spending. By attracting higher levels of investment, and encouraging growth, tax cuts could stimulate the economy and start creating jobs, even if this runs counter to the Treasury orthodoxy.

While lockdowns around the world are starting to lift, with the UK being no exception, the dominant media narrative remains focused on the medical evidence, ignoring the need for a national conversation based on building an economic plan to overcome the forced halting of the economy.

And it's here, that tax cuts are critical. While this was already a heavily indebted Government, adding up to £300 billion to the national debt is going to have generational implications.

The cost of the lockdown package is unprecedented by any peace time Government, and VAT receipts in March 2020 were reportedly at their lowest monthly figure since September 1992, the month following the UK's withdrawal from the European Exchange Rate Mechanism. The longer lockdown goes on, the higher that £300 billion figure creeps up. The only way to get the economy back on track is with tax cuts, while increasing taxes will be counterproductive.