If there was a prize for fighting back against tax authorities, the Italians would probably deserve first place. I’m not aware of any other country where tax offices get firebombed. The Italians also believe in passive forms of resistance, with tens of thousands of boat owners sailing away to protect themselves from the government.
But the Spanish are beginning to get into the swing of things, perhaps because they are increasingly upset by the plethora of tax hikes imposed by the supposedly right-of-center government in Madrid.
Here’s part of a report from NPR about a new tax revolt on the Iberian Peninsula.
When the Spanish government hiked sales tax on theater tickets this past summer, Quim Marcé thought his theater was doomed. With one in four local residents unemployed, Marcé knew that even a modest hike in ticket prices might leave the 300-seat Bescanó municipal theater empty.
So what did he do to protect the theater from fiscal destruction?
“We said, ‘This is the end of our theater, and many others.’ But then the next morning, I thought, we’ve got to do something, so that we don’t pay this 21 percent, and we pay something more fair,” says Marcé in Spanish. …He…suddenly had an idea: Instead of selling tickets to his shows, he’d sell carrots. “We sell one carrot, which costs 13 euros [$16] -– very expensive for a carrot. But then we give away admission to our shows for free,” he explains in Spanish. “So we end up paying 4 percent tax on the carrot, rather than 21 percent, which is the government’s new tax rate for theater tickets.” Classified as a staple, carrots are taxed at a much lower rate and were spared new tax hikes that went into effect here on September 1.
Very clever. Senor Marcé is getting lots of praise for his novel approach, though it’s unclear whether the ravenous tax bureaucrats will come up with some sort of ruling to squash the tax revolt.
Spanish media have dubbed this the “Carrot Rebellion,” and the Bescanó theater has won kudos from arts advocates nationwide. Shows are sold out. …Marcé, the theater director, says he consulted a lawyer before launching his carrot sales. He’s got backing from the local mayor too. And no one has stopped him so far. …He says he’s a little worried the government might declare it illegal to sell carrots at theaters. But dozens of foods are considered “staples” and taxed at only 4 percent. So if that happens, Marcé says he might switch to selling tomatoes instead.
And if he has some leftover tomatoes that are rotten, perhaps they can be used – along with spoiled eggs and moldy cabbage – to express appreciation for any tax collectors that happen to visit (I won’t say what the carrots can be used for).
So why doesn’t the title of this post award “three cheers” for this Spanish tax revolt?
Well, as much as I admire non-compliance when tax systems are too onerous, I suspect that these Spaniards are protesting against the idea that they should pay for big government, but I wouldn’t be surprised to learn that they very much support a bloated welfare state if someone else is picking up the tab.
In other words, they’re probably hypocrites, and I wouldn’t be shocked to learn that their Irish and Greek compatriots also are protesting for the wrong reason.
Moreover, it’s not specified in the article, but I’m quite certain that the Spaniards actually are protesting in favor of tax distortions. The 4 percent tax on carrots and other “staples” presumably is a special exception to the normal value-added tax of 21 percent.
If they were protesting the VAT, I would give them three cheers, but if they’re simply protesting the fact that theater tickets are now treated the same as most other forms of consumption, then I’m tempted to give this tax revolt only one cheer.
But I’ll still give them two cheers because I’m in favor of just about anything that will reduce the amount of money diverted to finance government.
That’s because the real fiscal problem, in Spain and the United States, is that government is far too big. And trying to curb the rapacious appetites of politicians with a tax hike is akin to trying to cure a group of alcoholics by giving them the keys to a liquor store.
P.S. The greedy Spanish government may have jacked up some tax rates so high that they could be beyond the revenue-maximizing point, though I doubt the politicians care. Heck, even international bureaucracies such as the IMF have figured out that it’s self-destructive to push tax rates so high that governments lose revenue.
P.P.S. Just to cover my you-know-what, allow me to take this opportunity to stress that maximizing revenue should not be the goal of tax policy. I’m a big fan of the Laffer Curve, to be sure, but policy makers should target the growth-maximizing point.
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Exactly Mr Bescanós. You form majorities to vote for the mandatory padding of your western standard of living with someone else’s work., then you rebell when you find out that some other majority had the reverse idea against you.
You all end up with carotts… in the mode Mr. Mitchell did not want to elaborate.
And of course I’ll echo the PPS. The Rahn curve is the true determinant of longer term sustainable prosperity. Tax hikes that occur in the space between the max of the Rahn and the max of the Laffer curve, always create less revenue — in the long term. That is because of the simple arithmetic fact that the lower growth eventually compounds to neutralize any additional initial revenue. And lower growth obviously feeds back into tax revenue. It is the classic reason why the ubiquitous communal pot of funds that the Soviets collected ended up smaller than the proportionately much smaller American pot of communal money.
In other words, Zorba’s corollary is that as one looks at the longer and longer term, the Laffer curve shrinks along the x axis and eventually becomes equal to the Rahn curve. That is just a more mathematical way to state the obvious fact that in the long term, the perpetually compounding effect of low, or high, growth dwarfs all other economic effects… and poor citizens of “selfish” societies end up better off than the supported citizens of societies with mandatory compassion/collectivism. Alas, looks like Americans are poised to commit suicide to provide another data point for this theory.
P.S. This argument is limited to rationally thinking people. Progressives believe that increasing government spending from 40% to 50% to be collectively managed, and thus equally reducing private spending, actually increases growth.