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Saturday, December 3, 2022

Government Aid Is Totally Misguided: Allowances For Those Who Do Nothing And Tax Hits For The Hard-Working And Ambitious!

By: Domen Mezeg / Nova24tv.si

“A carrot for those on welfare and a stick for workers, in the form of a reduction in real wages due to the abolition of the adjustment of income tax brackets to inflation, and a smaller increase in the general tax relief, is a strange message – but what matters most is that the trade unions are happy,” economist Lahovnik explained Golob’s “financial aid.”

According to the government of Robert Golob, a bill on temporary measures to address the impact of the rising prices on the most vulnerable groups of the population has recently been adopted. According to the authorities, the measures will mitigate the consequences and “the impact of high energy and consumer prices during the heating season.” However, economist Matej Lahovnik warned that this is not a measure that would actually be helpful, as it encourages non-work and penalises work.

The main intention of the bill is to reinforce the socialist logic – that something must “fall from the sky” for everyone, while the hard-working, self-driven and creative part of society that creates added value should be punished. This is about deliberately stifling the entrepreneurial spirit and creating a society of identical poor people who will be as financially disabled as possible and chained to the state budget. It is true, however, that we are once again becoming a society where there will not be so many opportunities for envy present, because in the end, we will all be driving around bad cars.

The current government is turning us into a society of passive and dissatisfied individuals who will wait for the state to take care of them. Or, to borrow the words of Zmago Jelinčič Plemeniti: “We will all be at home, raiding our mothers’ fridges.” And these are the exact people that the Golob government needs. People will seriously start to wonder whether it really pays off to try and create something or if it might just be better to instead get financial aid from the state. And recent words of the Minister of Labour, Luka Mesec, should be understood in light of this: “Unlike the previous government, in our team, we have decided to target our aid to those who need it most.”

If we were to provide equal aid as Austria, that would amount to 1.4 billion euros in Slovenia, but instead, we are providing as much as 74 times less
And not only is it a problem that the government is helping in the wrong way. The fact is that it is helping to an incomparably smaller extent than, for example, the Austrian government. These are mere crumbs that the government is tossing to its chosen few. Jožef Horvat, an MP from the New Slovenia party (Nova Slovenija – NSi), compared the financial assistance of the Golob government with that of our northern neighbours. As he pointed out, if we were to provide equal financial aid as Austria, that would amount to 1.4 billion euros in Slovenia, but instead, we are providing as much as 74 times less.

In the “Demokracija” magazine (“Democracy”), journalist Vida Kocjan focused on the tax reform under the current patronage of Minister of Finance Klemen Boštjančič. Initially, she reminds the readers of the chilling fact that he is the cadre from the quota of the Freedom Movement party (Gibanje Svoboda), which has proven to be clueless about public finances. He points out that his greatest achievement was working for two companies that ended up going bankrupt. We can only hope that the same fate does not await our public finances. And this is the kind of person who writes our tax legislation?! In addition, quite predictably, he wants to liquidate the measures taken during the term of the government of Janez Janša.

They want to punish those who are the most productive and hard-working
The new government is scrapping the previous government’s income tax law, which would have gradually increased employees’ net wages over the coming years. “The higher general tax credit would mean that every employee would receive a higher net salary each year, amounting to one month’s net salary more in 2025. However, Golob’s government team is changing that now. At the same time, the Janša government also stipulated that the general allowance would be adjusted annually in line with the rise in consumer prices. But Golob’s team intends to abolish this, too, even though we are witnessing extreme rising inflation on a daily basis. In July, it reached 10.8 percent in Slovenia, which is significantly higher than the average in the other euro countries.”

Higher taxes and lower wages are coming, even though the cost of living is constantly rising. At the same time, the educated and productive workers are being pushed out of our country: the tax rate for the fifth income tax bracket is being raised to 50 percent from the previous 45 percent. Rents will also be higher – there will be an additional tax on the income someone receives from renting out property. Under the previous government, the tax rate was 15 percent, but the Golob government plans to raise it to 25 percent. “At the same time, they are maintaining the level of normalised costs.”

“In times of crisis, the worst thing you can do is raise taxes”
“The tax increase is abnormally high, and it is a fact that this will also translate into higher rents. This means that tenants will be even worse off, most of them being young people, but also the elderly and those who are socially disadvantaged.” A boom in illegal or non-disclosed renting of apartments is also expected, and with all of this, no one can guarantee that the rents will actually be lower – what is more, the experience from the past confirms that that is not the case (we can think back, for example, to the times of the government of Marjan Šarec). And it should be kept in mind that it is not only the wealthy who rent out their property but also those who have inherited it and for whom it is a source of income for their livelihood.

And there are many more of the latter than the rich people. Here is what Lahovnik had to say about all of this: “The previous government’s tax reform was moving us in the right direction and was also in line with the OECD guidelines. Wages were being relieved through tax measures. The point was to increase net wages, and the increase would be higher and higher year after year in the following years. I have to say that I am very, very unpleasantly surprised by this proposal that the current government has made.”

“Namely, the essence of this proposal is that it raises tax rates and lowers the growth of the general allowance. All economists know that in times of crisis, the worst thing you can do to raise benefits is to raise taxes. By doing so, you further complicate the business operations for companies. and, of course, you also complicate the lives of citizens. We should also not ignore the fact that this is likely to have a negative impact on consumption, and that is why I find these measures to be very problematic.”

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