Spain Tries to Tax it's Way out of the Current Depression

By | January 2, 2012

Spain’s new government has recently come to grips with the reality that the previous administration downplayed the budget deficits by a significant amount for the year 2011. Upon discovering that the actual national deficit will surpass an astounding 8% of total GDP in Spain, newly elected President Rajoy announced historically massive tax increases and budget cuts for 2012. While the supposed budget cuts are very massive, it is unclear as to if they will actually stop Spain’s massive budget deficits by themselves. The one thing that is completely clear, is that Spain will try to tax the [supposed] rich, and everyone else in the country to make up for the government-caused budget deficits of past administrations. In a heavily Socialistic society, it always comes down to raising taxes as history as shown us here in Spain once again. Should America continue in it’s denial of budgetary reality as Spain has done for decades in the fiscal-reality-denying journey towards the falsehood of a Socialist Utiopia, these massive budget cuts and tax increases are just over the horizon for America too.

Spain’s recently passed into law budget cuts are as follows. From El Pai’s (accessed Jan. 02,2012):

The decree law of economic, financial and budgetary deficit containment today approved the Council of Ministers aims to reduce costs € 8,900 million and raise another about 6,000 temporary and by raising some taxes progressive. These are the measures that have been approved:
Agreement unavailability of spending
The figure has resulted in 8,900 million is how you distribute the spending cuts by ministries:
Development, 1,614 million; Industry, 1,091 million; Economy, 1.083 million; Foreign Affairs, 1016 million; Education, 485 million, Employment, 439 million, Finance, 432 million; Health, 409 million, Agriculture, 401 million, Defence 340 000 000 , Interior, 163 million, Justice, 48 million, Presidency, 19.6 million. In addition various ministries will have another cut of 13 million
Local authorities will also cut 1,040 million in revenue.
Inter-territorial Compensation Fund decline by 409 million euros.
Reduction of subsidies and loans for R + D + I for a total of 600 million euros.

Trimming senior
The Government will reduce the administrative structures of the state administration as far as secretaries and genearles addresses, which will fall in 18.9%.
Update freezes pensions and Labor and civil service, the Government has given a lime and sand
- Pension increases by 1%. Will benefit about 9,448,000 pensioners, representing a cost of 1,382 million euros.
Six-month extension 400 euros aid for the unemployed who have exhausted the supply. The measure represents a cost of 300 million euros and the Minister of Labour has been quantified by 125,000 beneficiaries.
- Freezing salaries of public officials.
Increase in working hours for civil servants to 37.5 hours (from 35 hr work week)
- Freezing of the replacement rate of public employee will in all public authorities except in the case of school officials, health, Forces and State Security and bodies for tax and labor inspection can be reached up to 10%.
– Non-renewal of the income of emancipation, keeping existing coverage, which affects 300,000 young people.
Deferred until January 1, 2013 the extension of paternity leave from two to four weeks. Deferred until January 1, 2013 implementation of the Law Unit for new beneficiaries, while maintaining current coverage to all beneficiaries. Freezing the minimum wage professional.

For Americans screaming against even the smallest of budget cuts, take a good look at the reality above, and understand that sooner or later America will be forced to do the same. That is, after Americans see massive tax hikes to pay for the big government Socialism that has eaten Spain alive the past two decades. Spain’s refusal to deal with the irresponsible spending promises of elected officials has them in an economic depression with an astonishing 22.8% U/E rate. Germany for example, is rolling along with a miniscule 5.5% U/E rate as shown here.

Spain’s New 2012 MassiveTax Increases:

The government spokesman has warned that this tax increase is “temporary, progressive and extraordinary.” With this measure, which applies only in 2012 and 2013, is to recaudar around 6,000 million euros.
– The state share rises on a scale of 0.75% for the first income level up to 7% at the highest level, from 300,000 euros of taxable income.
– Tax revenues for additional savings in percentages ranging from 2% for yields of up to 6,000 euros and 6% for yields exceeding 24,000 euros.
– IBI. The increase will affect 50% of homes in greater rateable value of each municipality. This increase is set in a progressive manner (10 per 100, 6 100, 4 by 100) in response to the age of the cadastral revision and, therefore, its adequacy to market value.
VAT super. Maintain VAT ‘super’ of 4% for new home purchases and recovers the deduction for home ownership retroactively to 2010.
Elimination of incentives for the purchase of commercial diesel. The government froze electricity rates, but the regulated gas price increased by 0.5% on average.
President Rajoy won the last election on a platform of…. refusing to ever raise taxes on the Spanish citizenry. That could explain why he refused to address the citizenry in announcing the massive tax increases for 2012, instead, relying on Vice President Soraya Saenz de Santamaria to make the announcement that constitutes the second largest tax increase in Spanish history, along with the massive, painful budget cuts that will total a whopping 8,900 million euros.

As Americans get ready for the 2012 National elections, they would be well-served to examine the consequences of the irresponsible debt-spending that is inherent in today’s Global Socialist’s agenda. It has crushed Spain and forced them into passing massive budget cuts that will hurt the majority-dependent-on-big-government-citizenry, and will further collapse the last remnants of the capitalistic entity that would have been the only viable solution to expand revenues for any chance at long-term economic growth in Spain. These very same Socialistic policies that have all but vanquished prosperity in Spain today, are also the basis for the United State’s President Barack Obama’s policy agenda. For further information on Spain’s recent attempt to climb out of the current economic depression please see Mike Shedlock’s article which states that the Depression in Spain will Worsen.

Also see: EU Plutocracy on the Verge of Collapse.

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