Monday, September 19, 2005

Flat tax key to Schroeder's comeback

I don't know how much attention Gerhard Schroeder was paying to the New Zealand elections, probably very little, but he has confounded the pundits and put the centre left in Germany within reach of another term in government. Slate has an interesting analysis, blaming the right's flirtation with a flat tax policy for a poor finish to an election they should have won easily.
The plan to reduce taxes on income and effectively boost taxes on consumption is unpopular in Germany for much the same reason it is in the United States—only more so. Germans tend to see progressive income-tax rates as part and parcel of a democracy. The notion that a secretary would pay the same proportion of her income in taxes as a CEO doesn't strike Germans as egalitarian, it strikes them as unjust. What's more, the trade-off of taxing consumption rather than income seems counterproductive in a nation where the lack of domestic demand is a continual problem. Germans need more incentives to consume, not fewer.

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