Who can cut taxes the most ... and will it work?

As the leaders of the main political parties announce proposed tax changes to deal with the impending recession, Larry Elliott in the Guardian explains the likely effects of tax cuts and highlights the fact that '... Keynes never saw tax cuts or increases in public spending as a panacea for ending slumps. He believed fiscal policy should only be used once every other economic tool had been exhausted; his remedy for the Great Depression was a mixture of devaluation, protectionism and cheap money, with public works only to be wheeled out as a last resort.' The recent experience of Japan, with a series of tax cuuting measures and the USA, highlights a risk, namely that tax cuts have to be large-scale to be effective and, even then, may only have a temporary impact, which can be limited if consumers believe that tax cuts now mean tax increases later.

(Link to article)

See Geoff Riley's thoughts on the announcements (Tax Stimulation)