Posted on 05/22/2006 6:52:49 AM PDT by grundle
German consumers were bracing themselves yesterday for the highest tax increase since the Second World War after parliament voted in favour of a controversial rise in VAT aimed at boosting the country's struggling economy.
Experts were divided yesterday on whether the three-point rise in value added tax to 19 per cent would improve Germany's economic fortunes, or put the brakes on the signs of a recovery.
The increase, which is due to come into effect in January, is the most significant reform to have been passed by the seven-month-old coalition government of Chancellor Angela Merkel.
Her Christian Democratic Union and its partners, the Social Democrats, who together have a 166-seat majority, easily won the Bundestag vote, which will leave consumers and companies carrying an extra tax burden estimated to be around £13 billion.
The changes affect not only consumer goods but also petrol, savings and insurance premiums. A commuters' tax break is to be reduced drastically.
The increases were attacked yesterday by both industry - which said the rises would halt the start of Germany's recovery - and consumer groups, who argued that the increased taxes would drive increasing numbers of Germans into poverty.
Thanks for your posts on this topic. I knew there had to be something we weren't hearing about this topic. We'll see if these tax increases are able to fix the debt, while not hurting the economy. I have great hopes for Merkle and her government.
but isn't money created by a money source somewhere - I always thought we just need to distribute the stuff.
Merkel was celebrated as an economic miracle - But she managed to have her tax expert (a bright guy - pro flat tax) sacrificed in her campaign.
I notice you conveniently ignored the first part of my post, and thanks for calling me "dumb" even though I argued in a civil tone. The US is running a huge current debt. It's a fact.
If taxes are high, economic activity is sluggish and there are fewer transactions. Cut taxes, and each dollar (or euro) moves from one 'person' to another more often in a given time. And the government basically gets a cut just about every time it changes hands.....
There we two parts to that reply. Pay attention.
(Denny Crane: "Every one should carry a gun strapped to their waist. We need more - not less guns.")
I apologize for implying 'dumb' -- however, it's aggravating to hear such naive 'static' views of an economy continue to be parroted.
We have run a large deficit in the US, because of the major recession, which started in 2000 after the 90's bubble and was accentuated by the 9/11 blow and the need to spend money on a military response. However, you should note that, since the tax cuts, the deficit has been declining. QED.
Yes, they look at what's happening in Ireland... with disgust. You'd think as someone knows what socialism doesn't work from growing up in East Germany, Andrea Merkel would know better. Konrad Adenauer must be shaking in his grave.
However, I re-examined your post carefully with a microscope and can see no hint of one example, never mind about two. I suspect we don't disagree on the general issue, but I still disagree with your first sentence....
It boosts the economy by allowing the government to give the people more money in the form of welfare & unemployment benefit increases; and by hiring more public employees to handle the increased work load, raising the GDP.
That puts more money into cirulation, thus allowing the people to buy the same amount of (now price inflated) products as they did before the increases, thus allowing the companies to continue scraping by....
It is basic Liberal Econ 101: emphasize GDP, and ignore CPI & prime rates.
It was this kind of thinking that kept us stuck in the Great Depression for a decade. Every time we'd start to come out of it the feds would squash the recovery with more tax & spend. And yes, I'm referring to St. Delano here.
Seems to me that government debt doesn't necessarily matter unless it's causing inflation.
Ping for a local perspective on this.
Prayers for a more rational government would be more helpful. I fought for 2% VAT-rise. And 1% of that should have gone back to the people. And now, it´s 2% for the budget and still 1% for the people. That´s a knockout for our consumption. But who expected a better performance from a Grand Coalition?
If it weren´t for the foreign policy, Merkel´s Chancellorship would be useless.
On the other hand we have to see that the money is not bundled, stamped and shipped to china in large container vessels... so I think we are as far away from a free market then we are from communism.
In the moment we see a large export of work to china, india and eastern europe - with only one reason - cheap labor.
As a reaction we keep up consumption in the US by printing money. Over here in the EU we go one step further - we don't consume.
If you look at the global picture we (US /Europe) are a little bit in the shit.
didn't want to say it's the government that should solve that problem - because if they where any wiser they had a propper job in the beginning.
And taxing everything boosts the economy how?
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