Britain's Market-Rocking Tax Cuts Have Been Compared to ‘Reaganomics.' But There Are Differences

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Comparisons between the ideology of Liz Truss, who became U.K. prime minister earlier this month, and Ronald Reagan have come thick and fast.

in the face of soaring energy bills, expected to cost more than £100 billion over two years. Markets have yet to be convinced of the government's fiscal credibility, according to the Institute for Fiscal Studies, a research group.A notable point of difference between the U.K. now and 1980s U.S. is currency strength. Aside from the sharp drop in sterling seen after Truss's announcement, the British pound has been declining against the U.S.

Reagan also managed to woo the more conservative wing of the Democrat party and passed his 1981 bill in the Senate 89–11. Truss's party, by contrast, remains bitterly divided and her plan has faced vocal criticism from high-profile Conservative politicians.Paul Winfree, research scholar at Queen's University Belfast, noted that while the first Reagan tax cut significantly reduced marginal rates , many of the other cuts were almost immediately scaled back when national revenues fell.

As of Monday, Truss had already U-turned on a key part of her plan, scrapping plans to reduce tax for the highest earners. That was despite her insisting Sunday she was"absolutely committed" to the cut. "It was within this expansion that the Reagan Administration could afford to both increase defense spending and further reduce marginal tax rates, although capital gains taxes were increased back to 28 percent in 1986," he added.Reaganomics' legacy remains a matter of sharply divided opinion. GDP growth and business expansion were delivered, but so were higher federal debt, increased income inequality and a higher trade deficit.

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