Thursday, January 31, 2008

Spanish General Election 2008....The Invasion Of The Tax Cutters

This is probably the first election campaign that I have observed in Spain where taxation has come to the fore as an issue. Even though many people in Spain dedicate incredible energy to trying to avoid taxes, there has never been any great groundswell of opinion in favour of tax cutting measures as electoral incentives. That is changing now as both major parties seek to offer competing offers on what they will do in the event of winning the election.

The Partido Popular (PP) started it, with talk of taking the mileuristas (those earning €1000 a month) out of those paying income tax, and of reforming the different tax bands. There is much that they fail to spell out on their proposal, we don’t know whether those who are currently paying 24% tax will in future be paying 20% or 30%. The difference is not insignificant. Also, if those who are earning €16000 a year will stop paying tax, what will happen to those earning 16001 – will they suddenly start having to pay 20%? The PP refuse to divulge any details on how much the proposal will cost, claiming that it is not possible to make the calculation. This is odd when you consider that they also claim it will be paid for by future economic growth, how do you know this if you don’t know what it will cost in the first place. I know they lack economics expertise in the PP headquarters, but surely someone there knows how to use a calculator?

Prime Minister Zapatero then responded with a proposal that at least as initially presented is not a tax cut at all, it’s a rebate that comes out of the budget surplus. However, the proposal has now mutated from being a one-off rebate of €400 to being an annual event throughout the life of the next parliament. Then it is not clear who will actually be entitled to receive it anyway, so further modifications of the proposal seem inevitable. Whatever the meaning of the details, we now have a process where competing tax offers have installed themselves as part of the electoral game, and once the genie is out of the bottle…..

Now Spain is not a country with historically high levels of taxation, nor is it one where state spending has been particularly high as a percentage of national product. The superficially attractive argument that people are better off having their own money in their own pockets is in the end a rich person’s argument. When people on lower incomes have to pay for everything, they stop going to doctors and they die younger. I don’t need public services that are starved of investment to pay for electoral bribes, and I don’t need expensive public transport. I’ve done all of that in Britain, there is no benefit in repeating the experience; it doesn’t work. So even though I stand to benefit financially from some of the proposals being made, I’m not interested; you can keep your tax cuts and the rebate too for that matter. In any case, the British example taught those of us who lived through it that much of what you supposedly get back on direct taxation later disappears through stealth increases on indirect taxation.

I like living in a country where people don’t have to live behind high fences in fear of the rest of their society. I want a public health service and education system, state pensions that do more than just keep people alive, and a transport system where I don’t need to consider getting a bank loan every time I want to cross the country by train. All of these have to be paid for. If there is any money left over after all of that, I propose to spend it on shipping all the tax cutting, neocon, “survival of the fittest” social-Darwinists to an unpopulated island somewhere in the Pacific, preferably one that is threatened by climate change. As the sea level rises they can hack each other to death to expand their little patch of sand without the rest of us having to suffer the consequences.

1 comment:

Tom said...

Hear, hear.

My first response when I heard about this rebate was, "But I can't invest €400 in a school or a hospital."

I suspect that beyond being an electoral bribe (in the sense that any tax-cut, rebate or other policy promise is effectively an electoral bribe), there's more than a bit of supply-side economics at play here... which is, as you put it, a rich man's idea.