Deficit Reduction and the Role of Taxes

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There are tough decisions to be made about the timing and pace of deficit reduction and about the mix of spending cuts and tax increases. Much has been written about scale and timing, so this paper focuses instead on the spending cuts versus tax increases debate and, in particular, on the potential role of tax increases in deficit reduction.

Deficit reduction is one of the biggest challenges - perhaps the biggest challenge - facing the Conservative-Liberal Democrat Coalition government. The ultimate test for a government that wants to be seen as progressive is: who will pay? Are the poorest in society protected from the worst effects of deficit reduction?

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