X

Create an account to continue reading.

Registered readers have access to our blogs and a limited number of magazine articles
For unlimited access to The Spectator, subscribe below

Registered readers have access to our blogs and a limited number of magazine articles

Sign in to continue

Already have an account?

What's my subscriber number?

Subscribe now from £1 a week

Online

Unlimited access to The Spectator including the full archive from 1828

Print

Weekly delivery of the magazine

App

Phone & tablet edition of the magazine

Spectator Club

Subscriber-only offers, events and discounts
 
View subscription offers

Already a subscriber?

or

Subscribe now for unlimited access

ALL FROM JUST £1 A WEEK

View subscription offers

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating an account – Your subscriber number was not recognised though. To link your subscription visit the My Account page

Thank you for creating your account – To update your details click here to manage your account

X

Login

Don't have an account? Sign up
X

Subscription expired

Your subscription has expired. Please go to My Account to renew it or view subscription offers.

X

Forgot Password

Please check your email

If the email address you entered is associated with a web account on our system, you will receive an email from us with instructions for resetting your password.

If you don't receive this email, please check your junk mail folder.

X

It's time to subscribe.

You've read all your free Spectator magazine articles for this month.

Subscribe now for unlimited access – from just £1 a week

You've read all your free Spectator magazine articles for this month.

Subscribe now for unlimited access

Online

Unlimited access to The Spectator including the full archive from 1828

Print

Weekly delivery of the magazine

App

Phone & tablet edition of the magazine

Spectator Club

Subscriber-only offers, events and discounts
X

Sign up

What's my subscriber number? Already have an account?

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating an account – Your subscriber number was not recognised though. To link your subscription visit the My Account page

Thank you for creating your account – To update your details click here to manage your account

X

Your subscriber number is the 8 digit number printed above your name on the address sheet sent with your magazine each week. If you receive it, you’ll also find your subscriber number at the top of our weekly highlights email.

Entering your subscriber number will enable full access to all magazine articles on the site.

If you cannot find your subscriber number then please contact us on customerhelp@subscriptions.spectator.co.uk or call 0330 333 0050. If you’ve only just subscribed, you may not yet have been issued with a subscriber number. In this case you can use the temporary web ID number, included in your email order confirmation.

You can create an account in the meantime and link your subscription at a later time. Simply visit the My Account page, enter your subscriber number in the relevant field and click 'submit changes'.

If you have any difficulties creating an account or logging in please take a look at our FAQs page.

Coffee House

What George Osborne can learn from the Paul Ryan/JFK tax cut plan

14 October 2012

11:35 AM

14 October 2012

11:35 AM

One of the highlights of the Paul Ryan vs Joe Biden debate last week was Ryan attempting to explain that you can lower tax rates and increase tax revenues. “Not mathematically possible,” snapped back Biden. “Never been done before.” It has, replied Ryan. “Jack Kennedy lowered tax rates and increased growth.” An incredulous Biden said: “Oh, now you’re Jack Kennedy?” The audience laughed, but the joke was on Biden. People like him (and he has plenty counterparts in Britain) think that the only way of squeezing more money out of an economy is to increase the tax rates and cut spending. JFK understood that it’s more complicated: you need growth, and you need lower taxes to encourage growth. Here’s what he had to say:-

[Alt-Text]


JFK was making this argument long before Art Laffer doodled a graph on a cocktail napkin. And why? Because this is not a new-fangled theory of neoliberal economics. He was restating basic common sense. Look around Europe today: the countries doing badly are those (like Britain) who think that austerity is enough: cuts and higher taxes will do the trick. Countries that don’t have enough ideas for pro-growth economic policies. People now have still to learn the basic JFK lesson:-

An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

Sweden’s 2009 stimulus was a permanent tax cut for the low-paid, which has been found to pay for itself almost entirely. That would, presumably, astonish Biden. But not JFK. Here he is again:-

“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy and increase tax revenues.”

Given that Biden was around at the time, you’d hope he’d remember that after JFK’s tax cuts, the American economy soared – as did tax revenues.

The taxes of JFK’s America and Reinfeldt’s Sweden were, of course, higher than Britain’s today. But the 2020 Tax Commission (on which I served) shows that there are many, many areas where there is scope to grow the economy – even, for example, copying German-style ‘mini jobs’ where you can earn €400 a month without paying any tax at all. A basic rule holds good: the surest way for government to encourage a recovery is to get out of the way and let people do the rest. George Osborne is a keen student of American history, so I have no doubt that he is fully aware of how JFK managed to steer America away from the low-growth, high-deficit trap in which Britain is now ensnared. He will also know the likely remedies. That’s why I’m looking forward to his mini-budget in December .

Give something clever this Christmas – a year’s subscription to The Spectator for just £75. And we’ll give you a free bottle of champagne. Click here.


Show comments
Close