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Income-tax cut empowers consumers

Published:Saturday | July 11, 2015 | 6:39 PM


Thelma Reynolds' letter to the editor ('Tax-mad Tufton mouthpiece of the rich', The Gleaner, July 11, 2015) taking issue with my contribution to the Senate on reducing income tax represents a misunderstanding or misinterpretation by someone who may be well intentioned but clearly does not understand how tax policy works.

First, I did not call for an increase in GCT. I said give people more money in their pockets by reducing income tax, so they can choose to do what they want to do with it, and focus more on consumption tax.

When people have more money to spend, chances are they will spend, save and/or invest more. This has several positive implications for any economy, including greater collection in consumption taxes, not necessarily from an increase in the consumption tax rate.

More money from reduced or no income tax means more freedom and flexibility for citizens to consume or do otherwise with their money. More spending also stimulates general economic activities, including for those people in the informal or non-income tax-paying economy.

Finally, this proposal has nothing to do with the need to ensure a social safety net for the poor and vulnerable. That need remains, and will continue to remain, in any society, particularly where poverty is stark and increasing.