Why did Margaret Thatcher cut income tax but double VAT ?

[ronki23]

The income tax before she came into power ranged from 44% to 98% but was then halved so that it's now 20% to 45%. However, VAT increased from 8% to 17.5% and is now 20%.

Trickle down theory suggests that the money saved from tax cuts will be spent by the 'rich' which in turn leads to more revenue for an individual/ business which in turn means they can hire more people and thus give them jobs. But by increasing VAT they will think twice before buying unless it's absolutely necessary.

 

[Milton Platt]

The income tax before she came into power ranged from 44% to 98% but was then halved so that it's now 20% to 45%. However, VAT increased from 8% to 17.5% and is now 20%.

Trickle down theory suggests that the money saved from tax cuts will be spent by the 'rich' which in turn leads to more revenue for an individual/ business which in turn means they can hire more people and thus give them jobs. But by increasing VAT they will think twice before buying unless it's absolutely necessary.

Either tax earnings or tax purchases......If you tax earnings, all money earned is taxed, which discourages both saving and spending.
By taxing purchases, you provide an opportunity for saving for a home and for retirement both by increasing money received from earnings and allowing people to save by controlling spending.

 

[ronki23]

Either tax earnings or tax purchases......If you tax earnings, all money earned is taxed, which discourages both saving and spending.
By taxing purchases, you provide an opportunity for saving for a home and for retirement both by increasing money received from earnings and allowing people to save by controlling spending.

I read that the EU rules state that VAT must be at least 15% minimum and Geoff Howe did this to cosy up to Europe

 

[metis]

The VAT helps to compensate for the cheaper products that are imported from countries that have low wages, or subsidize their own production, or who "fudge" their currency.

 

[ChristineM]

The income tax before she came into power ranged from 44% to 98% but was then halved so that it's now 20% to 45%. However, VAT increased from 8% to 17.5% and is now 20%.

Trickle down theory suggests that the money saved from tax cuts will be spent by the 'rich' which in turn leads to more revenue for an individual/ business which in turn means they can hire more people and thus give them jobs. But by increasing VAT they will think twice before buying unless it's absolutely necessary.

The tax cuts benefitted her rich cronies most.

Increasing VAT was a simple way of spreading the burden.