Economic theory does not provide a single explanation for the causes of inflation. Believing that it is always of the same nature goes against historical evidence and cannot lead to effective or fair solutions. The title of this article was “Incoming inflation”. On November 4 last year, just like the inflation that caused so many scandals these weeks, an inflation rate of 9.4 percent was experienced compared to the previous year. The sectors that caused the price increase in August: energy, housing and water, followed by 8.5, transportation and the remaining sectors remained below 2. The electricity scandal was the number one scandal, but not when Aznar privatized. On another occasion, we pointed out that there is fierce competition between renewable energies and fossil energies, and I think this is the source of inflation; The solution for the People’s Party was to cut taxes and lower taxes, without saying what it was or what it was for. Oil and gas companies have limited production to keep prices high and bullish.
As with all trade wars, an increase in demand causes an increase in the prices of goods and services and, in the absence of balancing and social negotiation mechanisms, the factors that cause inflation. President Sánchez is a little late because inflation was unleashed a few months ago and what the war in Ukraine has done is exacerbating it. People’s spokesman Cuca Gamarra maintains his erre que erre: the solution is to reduce and abolish taxes. Economic theory does not provide a single explanation for the causes of inflation. The tax avoidance of most liberal currents is so sincere that it is impossible to fight it through arguments. However, it is easy to verify with OECD data that it is the countries with the highest Income Tax (Sweden, Netherlands, Germany, Denmark, United Kingdom, Japan, Switzerland, Norway or France) that belong to this organization. Those with the highest domestic product, the highest gross per capita. The same is true for unemployment rates or productivity. It is often said that communities like Madrid lower taxes and work better; this is not true because health, education and social services, infrastructure, aid to vulnerable groups including companies are financed by the central government with taxes from the State. It is the person who pays for the basic services of the Welfare State. If the government lowers income taxes, it reduces investment in education or health. Reducing the income tax leaves more money in the hands of consumers, which can increase inflation. If the first opposition party wants to make a strong opposition, it cannot just say that taxes should be reduced, it has to add which taxes and which expenditures should be abolished. A government program cannot be limited to the repetition of the liberal catechism’s belief that “we must abolish taxes.” Something must be said about the limitation of oligopoly.
Public Administrations enter and spend almost half of the Gross Domestic Product and, contrary to what is often said, each euro spent by any public administration produces more than this amount in final revenue for the entire economy, under certain conditions. It has a multiplier effect. Fiscal policy, budgets are what the government considers to drive the economy during the budget year. No government can leave the direction of budget and fiscal policy to the opposition as a condition of agreement. What public spending does is put more money in the hands of citizens; It is completely wrong that the state is “stealing” it; on the contrary, it puts more money in their hands. The causes of inflation must be sought in monopolies in real or caused shortages by those who make products, services or factors more expensive. Reducing or eliminating taxes eliminates services to citizens such as education, health, social services and even retirement.
It also has a contractionary, recessive effect on the economy. It is necessary to collect taxes on the greatest wealth and the greatest income so that they have a redistributive character.
“People at the top, people like me should pay a lot more taxes” Warren Buffett is one of the three richest men in the world.