Truss has been cheered by conservative defenders of US supply-side economics, including many of Trump’s key supporters of tax cuts. Steven Moore, the former president’s external economic adviser, praised Truss for his willingness to “challenge the prevailing orthodoxy by cutting taxes to boost growth,” calling the package “brave.” and sound policy decisions.”
“The most significant change is the reduction of the top income tax rate from 45% to 40%,” Moore wrote. “This will bring jobs, capital and business back to the UK.”
But many critics have lined up to denounce the tax plan, which could spark an economic war with the Bank of England, a combination of economic contraction and price hikes that could undermine the global economic recovery. warns.
The impact of past tax cuts, including one Trump signed into law in 2017, is a source of such criticism.
Mr. Trump has cut tax rates for income earners, including the top earners, just as Mr. Truss has suggested to do so. It also reduced various business tax rates. This is in contrast to the UK’s plan to undo plans to raise corporate taxes. Trump said all cuts would encourage businesses to invest, hire and raise wages, boosting economic activity.
But early evidence, including research by IMF economists, suggests that Trump’s cuts haven’t delivered the kind of investment and productivity surge conservatives have promised. Such gains, if realized in the UK, could help combat UK inflation.
Instead, the cuts boosted consumer spending and helped temporarily boost U.S. growth, but could be dangerous in a high-inflation environment, the IMF found.