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Recession causes reverse fiscal drag

Geoff Riley

3rd June 2009

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This BBC news article is perfect for explaining how a recession allied to a fall in household wealth leads to reverse fiscal drag. Tax revenues from top rate tax payers is set to shrink by more than £15bn adding to the enormous prerssure on government finances and borrowing.

“This year 25.4 million basic rate payers are expected to contribute £65.1bn, while just 2.91 million higher rate payers will pay £75.1bn.”

HMRC have just launched a new teaching resource on taxation - available here

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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