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Archive for August 31st, 2011

In a perverse way (pun intended), I admire German politicians for their creativity. They will figure out ways to tax just about anything.

Their latest scheme is a plan that requires streetwalkers to put money in parking meters in exchange for a slip of paper that entitles them to…um…ply their trade for a specified period of time.

Here are some excerpts from the Daily Mail report.

German Parking and/or Prostitute Meter

Prostitutes working the streets of the former German capital are now having to pay £5.30 per night to a modified parking meter – to gain permission to ply their trade. Sex workers in Bonn face hefty fines for not forking out the new ‘income tax’ which has been brought in to try and regulate the outdoor aspect of the industry. It is to bring them into line with the country’s brothel workers who already pay out a percentage of their profits in tax, which varies depending on the region. …if caught without a valid ticket, offenders would be reprimanded. They would then face fines, and later a ban. The fee is a daily charge, and irrespective of how many punters are entertained. …specific quarters have been designated as sex work zones. City officials have created ‘consummation areas’, which are wooden parking garages where customers driving cars can retreat to with their prostitutes. Dortmund has a similar system where prostitutes buy tickets from petrol stations.

I suppose this is the point where I normally would make some snide comments about greedy politicians, or perhaps offer some analysis about the economic impact of taxation.

But this story is so bizarre that I can’t even get to that stage.

What happens if you’re just a regular motorist and you put money in the meter and press the wrong button?

And I know that most governments will put a boot on one of your tires to disable your car if you don’t pay your parking tickets. Does this mean hookers who don’t buy a street-walking pass will get a chastity belt?

Does the city government also charge for use of the garages in the “consummation areas”? And when did it become the responsibility of German taxpayers to finance something like that?!?

And for the hookers in Dortmund who get their passes at the petrol station, do the mechanics check “under the hood” if they use full service? (okay, pretty lame, but I couldn’t resist)

Most important, will the politicians take this idea to its logical conclusion and put prostitute meters in Parliament? In other words, require politicians to put money in a meter before  they try to buy support from interest groups by providing handouts and special preferences.

That’s one tax increase even I could support.

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I’m normally disappointed when religious figures comment on economics, particularly since they often turn the individual call to charity into a blank check for government-coerced redistribution. This runs contrary to individual choice, free will, and morality.

So I’m delighted that Ettore Gotti Tedeschi, writing for  L’Osservatore Romano, the quasi-official newspaper of the Vatican,  persuasively explains how higher taxes simply encourage a downward spiral of more spending, more debt, and economic despair. Here’s the key segment from his column.

…taxation in all its forms only permits further growth in public spending… During a prolonged crisis, inheritance taxes, new forms of taxation or similar alternatives reduce or wipe out resources for investments, discouraging the trust of investors, penalizing the cost of the public debt and the possibilities of its renewal at its expiration. In this context, imposing taxes on property and on income is equivalent to a suicidal anti-subsidiarity of the state to the citizen. Those who legally possess assets, on which they have paid the proper taxes, have contributed to creating wealth and, thanks precisely to these assets, continue to produce them with investments and consumption. Further forms of taxation would not be synonymous with solidarity but only with greater public spending and, perhaps, a higher debt and more widespread poverty. High taxes penalize saving, generate distrust in the ability to stimulate recovery, hit families and prevent the formation of new ones, as well as creating uncertainty and precariousness in employment. In short, they lay the foundations for another phase of unsustainable development.

What makes the editorial so remarkable is that Mr. Tedeschi not only understands economics – as illustrated by his discussion of how higher tax rates discourage productive behavior, but his grasp of real-world politics. He recognizes that higher taxes will simply lead to higher spending.

But maybe that’s an easier lesson for honest Europeans to grasp. For the past several decades, they have seen politicians – over and over again – play the bait-and-switch game of raising taxes, supposedly to reduce red ink, only to have the money used to expand already bloated public sectors.

The value-added tax, not surprisingly, has played a key role in Europe’s fiscal nightmare.

Forty years ago, southern European nations had medium-sized governments and large deficits and northern European nations had medium-sized governments and small deficits.

Today, southern European nations have had large-sized governments and large deficits and northern European nations have had large-sized governments and small deficits.

The only big change is that all these nations now have VATs and the burden of government spending is much higher. But the deficits generally have stayed the same, consistent with the political culture of the respective regions.

In other words, Milton Friedman was correct many years ago when he warned that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

And Mr. Tedeschi is correct today with a similar observation.

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