Ms. Truss has been cheered by supply-side conservatives in the United States, including many of the main supporters of Mr. Trump’s tax cuts. Stephen Moore, who served as an outside economic adviser to the former president, praised Ms Truss’ willingness to “challenge the reigning mainstream by cutting taxes to boost growth”, calling the package a “a courageous and right policy decision”.
By far the most significant change has been the reduction of the top income tax rate from 45% to 40%. “This will bring jobs, capital and businesses back to the UK”
However, a host of critics lined up to reject the package, warning that it would incite economic war with the Bank of England and risk a damaging combination of economic downturn and skyrocketing prices, which in turn could affect the global recovery.
The impact of previous tax cuts, including those signed into law by Mr. Trump in 2017, is the fodder for those criticisms.
Like what Ms. Truss has suggested, Mr. Trump has reduced tax rates for earners across the spectrum, including the top earners. He also cut many business tax rates – in contrast to the British plan, canceling the planned corporate tax increase. Mr. Trump said his full package of cuts would kick-start economic activity by encouraging businesses to invest, hire and raise wages.
However, early evidence, including studies from IMF economists, suggests that Mr. Trump’s cuts have not delivered the high returns on investment and productivity that conservatives have promised. If such increases happen in the UK, they could help fight inflation there.
Instead, the cuts boost consumer spending, an outcome that temporarily expands growth in the United States, the IMF found, but can be dangerous in a high-inflation environment.
