Ms Truss has won acclaim from conservative champions of the US supply-side economy, including many of the leading supporters of Mr Trump’s tax cuts. Stephen Moore, who served as the former president’s outside economic adviser, praised Ms Truss for her willingness to ‘challenge reigning orthodoxy by cutting taxes sharply to boost growth’, calling the package a ‘bold and shrewd policy move “.
“By far the biggest change is the reduction of the top tax rate from 45% to 40%,” Moore wrote. ‘It will bring jobs, capital and business back to the UK’
A host of critics, however, lined up to denounce the tax package, warning that it will spark an economic war with the Bank of England and risk a damaging combination of economic contraction and soaring prices, which in turn could hurt the global recovery.
The impact of previous tax cuts, including those enacted by Mr. Trump in 2017, fuel these criticisms.
Just as Ms. Truss proposed, Mr. Trump cut tax rates for earners of all backgrounds, including those in the highest bracket. It also cut various corporate tax rates – a contrast to the UK plan, which reverses a planned rise in corporation tax. Mr Trump said his comprehensive package of cuts would revive economic activity by encouraging businesses to invest, hire and raise wages.
Yet early evidence, which includes studies by IMF economists, suggests Mr Trump’s budget cuts have failed to deliver the investment and productivity gains the Conservatives had promised. If such gains occur in Britain, they could help counter inflation there.
Instead, the cuts boosted consumer spending, an outcome that helped temporarily boost growth in the United States, the IMF found, but could be dangerous in an environment of high inflation.