The Logic of Taxes

To start with an observation concerning government. If you cut down on expenses or raise taxes it has consequences elsewhere. Which means that the outcome in the budget normally will not be what you think. Most European Government does not seem to have understood this.

 

If you cut VAT a couple of percentage ,people consume more and VAT income increase. If you raise social cost fewer people will be hired and personal tax income will go down and social costs go up.

 

You think this is simple! It isn´t. Most Prime Ministers and Finance ministers I have met does not understand this. When the deficit occurs one year later they will say: “The international conjuncture was against us! Sorry, we have to raise taxes.”