The draft version of the government action plan suggests introducing a “solidarity” tax on income and a “pollution” tax for diesel cars. The words are new but the principle is the same. It is nothing else but a progressive taxation of income and a tax on car-owners.
“Solidarity” Tax = Progressive Taxation
The “solidarity” tax is described as an additional tax on higher income. If you earn more than is considered “a higher income”, you will have to pay a larger tax. How is it different from a progressive tax?
Of course, personal income tax and the future “solidarity” tax are not the only taxes levied on income. If you earn 900 EUR after tax, you consequently pay around 180 EUR in income tax, 370 EUR in social security taxes and 110 EUR in healthcare taxes. You earn around 1,560 EUR, yet you receive only 900 EUR
If the government considers a wage of 1,000 EUR before tax to be a high income and therefore implements additional 10% tax on an income any larger than that, your income tax reaches 25% instead of the original 15%. By virtue of the solidarity tax, your family receives even less than 900 EUR.
Moreover, the extra tax you pay does not get you extra benefits. If you earn 900 EUR after tax, you pay three times the amount of taxes for social security than those earning 340 EUR. Yet your pension will not be even twice as large. You pay three times the amount in healthcare taxes, yet you would both be treated the same.
Want to talk about “solidarity”? You already pay 12 times (!) more in income tax, while earning only 3 times the wage.
The traditional government cop-out that it would only tax the mega-rich are unconvincing. The only group that the government could realistically tax and hope for any meaningful tax revenue are employees.
Unfortunately, only one in six employees earn 900 after tax per month. Five out of six earn even less. How is that “high income”? And if someone wants to talk about solidarity, those earning more than 900 already bring in half of the income tax revenue. Those earning less (5/6 of working population) bring in another half. Where is the “solidarity”? If the “solidarity” tax were enacted the already skewed situation will get even worse.
Pollution tax = a tax on the poor
Another idea proposed by the government is to tax diesel cars, especially older ones since they tend to pollute more. First, it would be a step towards a general car tax. Do you really believe that the government would only tax diesel cars but not the ones running on petrol?
It is true that older cars in general are less eco-friendly. But it is also true that they are cheaper and thus bought by people with lower income. Taxation of “more polluting” cars is nothing less than taxation of those who cannot afford brand new vehicles.
But why do we need car tax at all? If you pay 100 EUR at the pump, you actually get only 46 EUR worth of diesel; 54 EUR is taxes: excise duty, VAT, and VAT levied on excise duty. Make a note here: even taxes are taxed.
Your average car in Lithuania is approximately 15 years old and worth a few thousand euros. You pay your car’s-worth in fuel taxes in few years.
Some politicians and the self-appointed “green police” scoff that our cars are old and that Lithuania is a landfill for old cars. No argument there: poor citizens of a poor country drive poor cars.
Many of us would gladly buy shiny new cars if we could afford them. But the premise that additional taxation will force people to buy new cars is flawed. After all, if the older cars are taxed, the poor are not just going to buy new ones. Either they are going to buy even older and cheaper ones, or they won’t buy them at all. We would be on a slippery slope to where a select group of people drive shiny new cars (probably with a tax break) and the rest are reduced to bikes and buses.
The draft action plan is uninspiring. Let us just hope that the decisions on “solidarity” and poor car owners are not final. Because next on the list of things to tax are cheap, popular food products, like cookies and pastries. Because everyone can use a tax or two. “Solidary” indeed.
