Thursday, May 11, 2017

The Tax Credit Story

Back around a decade ago, there was this effort in the US during the Bush era to create an economic stimulus situation.  The government, in its efforts told everyone about this great check that would be coming.  For me, I was speculating about a $600 check.  Don't ask me why....I figured that it would be in this range.  Around six weeks later....I got my check....$189.  It really wasn't much to get excited about.

I sat and looked at it and eventually made a decision just to spend it on a set of new tires.

In a way, it was a great stimulus event for a brief week or two across America as everyone got their little check and spent it right away.  Some bought pizza.  Some bought a weekend at some casino.  Some gave their kid a new bike.

I am reminded of that moment from an episode yesterday in the German news.

The Finance Minister (Schauble) has let the public know that tax revenue collection is doing an amazing job across the sixteen states and the nation.  In fact, they can project out to 2021 (four years) and say that they will have an extra 54 billion Euro in their hands that they really don't need.

Well....his words were simply....'excess'.

How does the money come to exist?  Extremely positive sales period going on.  Massive effort to track down tax avoidance people.  Audits forcing people and business operations to cough up money. A VAT (sales tax) program that effectively works.

What Schauble the heat of a campaign period (remember, he's CDU)....that AFTER the September election, it would be the right time to discuss tax relief on people.  In essence, he's suggesting a sort of tax cut down the road.  He's not saying how much....just that maybe you could reshuffle the VAT around and lessen sales taxes on certain things (like baby diapers).

Naturally, the opposition political parties were angry about this tax cut suggestion.  They believe that the government itself is the best device of handling revenue. Now is the time to take the 54 excessive billion Euro, and spend it on infrastructure, libraries, soccer stadiums, railway expansion, art, etc.  They don't want the tax credit talk to get loose and suddenly you loose out on spending the 54 billion on government projects.

How would the money be shuffled around?  No one clearly says.  The general feeling is that some items would have their VAT rate (sales tax) changed drastically, and some minor cash flow back to individuals or business operations.  With a population of 82-million people, the take for each person would be roughly 185 Euro per year.

Yeah....185 Euro check....more or less.

That's how I came to remember my $189 stimulus check from the Bush era.

How would Germans spend their 185 Euro?  Remember, that's for every single person....every kid....every migrant.

There are two ways of looking at this.  One is the stingy German gal who will spend six months thinking over the 185 Euro in their purse, and will eventually put it into a one-percent savings account. The second way is the German who decides to have a full week of vacation in Bavaria at some cheapo bed and breakfast.

Oddly, in his chat about this excess money.....he never brought up the Solidarity Tax.....which is set to dissolve in 2019, unless the government figures out a way to keep it going.  My gut feeling is that this money here....the supposed to keep you focused on things while they pass a permanent fix to the Solidarity Tax.

So, if you hear a couple of Germans talking in the pub over this tax credit will understand the whole story.  Don't expect them to be hyped up much over 185 Euro....course, it would help to pay for their bar bill.

1 comment:

Jess Short said...

Remember when Germany hosted the World Cup. Everyone was in a frenzy about Football. That was when the politicians zapped us with a 19% sales tax.

Politicians always wait until you're back is turned before the stab you. I wonder what is in store for us in the next year.