Spain Punishes Its 99% With More Austerity

Crossposted from

Spain, already in a second recession due to the utter failure of austerity, has decided to double down an what hasn’t worked. From the AP:

Wednesday’s increases in sales tax include a 3 percentage point hike on products and services like clothing, cars, cigarettes and telephone services to 21 percent and a 2 percentage point increase on goods such as public transport fares, processed foods and bar and hotel services to 10 percent. The sales tax on basic goods like bread, medicine and books stays at 4 percent.

Other measures outlined Wednesday included:

—€660 million of cuts in government spending beyond the reductions already outlined in the 2012 budget

wage cuts for civil servants and members of the national parliament

further closures of state-owned companies

tax deductions for homeowners to be scrapped

a 30 percent cut in the number of town councilors

slight reduction in unemployment pay, designed to encourage jobless people to seek work more quickly.

— 20 percent cut in government subsidies to political parties and labor unions.

possible privatization of ports, railways and airports

Notice that not one of these measures causes the rich even the slightest bit of pain? Value Added Taxes (which is going up to 21%) is extremely regressive as opposed to a progressive income tax.

Consider this: If I make $500k a year and I only spend $50k on food and clothes and whatnot and you raise taxes on that stuff by 3%, now i’m spending $51,500. The rest of my money is not touched. Now you make only $50k a year and spend ALL of it on clothes and food and whatnot. Now you can buy less when taxes go up. That’s why VAT is one of the most unequal ways of taxing a populace. It concentrates wealth to the top and leaves the rest scrabbling to feed themselves.

My favorite part of this is the reduction on town councilors. Spain is literally reducing the amount of representation for its middle and lower class citizens. The rich will be represented no matter what so this won’t affect them at all. On top of that, witness the privatization of a bunch of industries which will, without a doubt, be sold for a song to people with connections. These “special” people will then charge more for those services than the government ever did (with worse results) and will demand government subsidies so they can make more money.

It’s a great time to be rich in Spain.

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