With all the ‘electioning’ all over the place, there are many promises tossed about by all sides. Some promises are for tax cuts. Others are for introducing new taxes – but in a way that will revenue neutral. And while we know that a tax cut means that we will hand less of our money to the government, what exactly does does revenue neutral mean?
Revenue simply means income: how much money is actually coming in.
Neutral speaks for itself: no change. Or it could mean ‘not positive, not negative’ = 0.
So, when a government changes taxes around, but in a way so that the changes are revenue neutral, it means they will not take in more in taxes than they had before. It does NOT, however, mean that each taxpayer will still pay the same amount! To the contrary – if everyone were to pay the same as before, there would have been no point in changing the tax system. Some will pay more, some will pay less, but the total will add up to the same number. (And if you believe that, I just happen to have this miracle-cure for….)
Of course, English is a wonderfully flexible language!
For example, take the phrase ‘You can never put too much water into a nuclear reactor’. Among others, it could have two rather opposite meanings:
- ‘You can never put too much water into a nuclear reactor’ (as in, if there is too much water- kaboom!)
- ‘You can never put too much water into a nuclear reactor’ (as in, water makes it so much safer, so pour in as much as you possibly can – it will not be too much)
The phrase ‘I will introduce new taxes, but it will be revenue neutral’ can also be interpreted in several different ways. Either, as the politician hopes we will interpret it, it could mean that the amount of ‘taxes collected’ would be unchanged (as was explained above).
However, the ‘it’ might also be referring to my income. As in, after taxes, my revenue (inome) will be neutral…exactly ZERO!!!
So, next time politicians introduce tax changes which will be ‘revenue neutral’, do not forget to ask them WHICH revenue they intend to neutralize!