Americans whine and complain about their tax system (with justification – it’s full of loopholes and grossly inequitable) but overall US taxes are pretty low. Compare it with the new Spanish personal income tax rates just published. Can we all spell “confiscatory”? Allow me to mention that this doesn’t include the increases to the property tax rates, nor what the regional governments are likely to do.
Mr. Rajoy’s government broke its electoral pledge not to raise taxes within a month of taking office (just one of many). He claims he had no choice in the matter, that the markets would punish Spain for otherwise missing their debt-to-GDP targets.
But let’s make no effort whatsoever to fix the porous regional financing model, which is the real reason Spain missed the target; let’s make no effort to broaden the tax base by stimulating economic activity; let’s make no effort to curb the grossly bloated government payrolls and expense accounts; let’s make no effort to sell off public assets; let’s make no effort to cut back some of the grossly inefficient subsidies the government hands out to pet industries; let’s make no effort to bring efficiency to public services or introduce a co-pay feature; let’s make no effort whatsoever at any sort of difficult reform that might involve actual leadership when we can simply squeeze the middle class until the pips squeak.
In the next couple of months, Mr. Rajoy will certainly propose to raise the sales tax from 18% to 20% or even 21%, despite hypocritically excoriating his predecessor when he raised the same sales tax from 16% for the exact same reasons. The Spanish Parliament is sure to kowtow to the measure. Of course – the Partido Popular won an absolute majority in Parliament on the back of a campaign whose promises they are systematically breaking like a resurrected Evil Knieval.
What middle class you ask? Not much of one left in Spain where unemployment continuous to grow sharply and is already above 22% (48% if you’re under 25); where another 20% of the work force is employed by the public sector; where another large percentage of workers are on temporary contracts that pay them subsistence wages with no benefits or guarantees; where every employee has to carry the deadweight of 2.5 unproductive citizens. No, not much is left of the productive middle class after eight years of socialist blundering, and Mr. Rajoy seems determined to finish the job and deliver the coup de grace.
The Spanish are fond of saying that there is no comparison between Spain and Greece. That is true: Spain is somewhat larger. The sooner we have our own Reichskommisar assigned in the Greek fashion, however, the happier I’ll be. The Germans may be obsessed with austerity, but at least they’re likely to really turn the screws on the political jokers who have ruined the country, made off like robber barons with the wealth of the common people and now pretend that they have the solution!
Apparently it is to squeeze a little more.
Signing off from the Madrid Soviet, do’svedanya Amerika!