Post by account_disabled on Feb 22, 2024 3:49:51 GMT -5
The new general secretary of the Popular Party, Alberto Núñez Feijóo, has proposed "reducing income tax withholdings" to return a part of what has been collected in excess and "impact that 10% inflation." This argument is a true economic atrocity for the reasons that I am going to explain very simply and leaving aside two other secondary issues. One, that the PP could correct taxes when it governed so that inflation did not increase the fiscal pressure and it did not do so; and, another, that reducing withholdings on account of the payment of a tax - as Feijóo proposes - is not equivalent to lowering it. As I have explained in other previous articles in this newspaper , the high price rise that we are experiencing is especially serious and difficult to stop because it occurs as a consequence of very different factors and whose possible responses can neutralize each other.
Although each of these factors occurs with more or less intensity in different economies, current inflation in all of them has a multipolar origin: excess liquidity as a consequence of the expansionary monetary policies of central banks in recent years; demand pressure after the end of confinements; supply blockages and shortages in supplies of many raw materials or products essential for industry or daily life ; rising energy prices for specific sector and geopolitical reasons; lack of competition that allows many companies to unjustifiably raise margins to obtain Costa Rica WhatsApp Number extraordinary profits with higher prices; depletion of natural resources; and, all of this, worsened by the invasion of Ukraine and the sanctions against Russia . Well, lowering withholdings or even taxes in general would not only not help combat the current price increases but could actually increase them. It is evident that the component of inflation that may be related to excess liquidity is not resolved but rather worsens if more means of payment are placed in the hands of consumers. The same would happen with price increases that are produced by excess of demand with respect to supply: they would be even greater by lowering taxes and causing an increase in private consumption.
Nor do you have to be a lynx to understand that price increases caused by blockages in supply, lack of competition or problems in the energy sectors will in no way be able to be stopped with fewer taxes on the income of physical persons. Neither Feijóo nor any other leader of the Popular Party says atrocities like this now by chance. They know very well what they say and who benefits what they propose. In the face of monetary or demand-based inflation, what is needed is rather increases in interest rates , to curb the demand for money, or taxes, to limit the demand for goods and services. Another thing is that neither one nor the other measure is appropriate now because these monetary or demand components are much weaker than those that have to do with supply. And because, if they were taken, an immediate recession would occur since the economies would collapse due to demand, as well as supply. That doesn't mean you have to sit back. We must prevent price increases from translating into loss of purchasing power in the most vulnerable social groups or loss of efficiency in companies , and for this, aid is needed, either through spending (much easier due to its immediacy and simplicity and better impact on income) or taxes.
Although each of these factors occurs with more or less intensity in different economies, current inflation in all of them has a multipolar origin: excess liquidity as a consequence of the expansionary monetary policies of central banks in recent years; demand pressure after the end of confinements; supply blockages and shortages in supplies of many raw materials or products essential for industry or daily life ; rising energy prices for specific sector and geopolitical reasons; lack of competition that allows many companies to unjustifiably raise margins to obtain Costa Rica WhatsApp Number extraordinary profits with higher prices; depletion of natural resources; and, all of this, worsened by the invasion of Ukraine and the sanctions against Russia . Well, lowering withholdings or even taxes in general would not only not help combat the current price increases but could actually increase them. It is evident that the component of inflation that may be related to excess liquidity is not resolved but rather worsens if more means of payment are placed in the hands of consumers. The same would happen with price increases that are produced by excess of demand with respect to supply: they would be even greater by lowering taxes and causing an increase in private consumption.
Nor do you have to be a lynx to understand that price increases caused by blockages in supply, lack of competition or problems in the energy sectors will in no way be able to be stopped with fewer taxes on the income of physical persons. Neither Feijóo nor any other leader of the Popular Party says atrocities like this now by chance. They know very well what they say and who benefits what they propose. In the face of monetary or demand-based inflation, what is needed is rather increases in interest rates , to curb the demand for money, or taxes, to limit the demand for goods and services. Another thing is that neither one nor the other measure is appropriate now because these monetary or demand components are much weaker than those that have to do with supply. And because, if they were taken, an immediate recession would occur since the economies would collapse due to demand, as well as supply. That doesn't mean you have to sit back. We must prevent price increases from translating into loss of purchasing power in the most vulnerable social groups or loss of efficiency in companies , and for this, aid is needed, either through spending (much easier due to its immediacy and simplicity and better impact on income) or taxes.