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Opinions 2013 11 21

J.V.PALECKIS “Progressive taxes – litmus test”

A good 15 years ago during an informal meeting German Chancellor Helmut Kohl asked Algirdas Brazauskas which type of taxes, progressive or flat, we have in Lithuania. When he heard the answer ``flat``, Chancellor sighted: ``maybe flat taxes are a good thing, but in Germany, if I attempt to introduce flat taxes instead of progressive ones, the next day millions of people would go out on the streets and sweep the whole government and myself away``.
Chancellor Helmut Kohl brieflly explained why all of the old EU countries as well as the US, where it was first introduced applies progressive taxes. If you earn more, you can give away more for common public interest, through the taxes. Because this rule is socially correct for most europeans its seems to be the only one possible. Protesting people wont allow to break the rules or for the state to become a protector of the rich.
The former Soviet union and its affected countries also had progressive taxes. Estonians were the first to refuse such a taxes after the collapse of ``barracks socialism``. In 1993 they introduced flat taxes wich meant that despite different income people will pay the same tax percentage. Estonians were followed by latvians and lithuanians. Soon bulgarians, czechs, romanians and slovaks joined them as well. At times of ``savage capitalism`` nobody was suprised and no one protested against wealth being loaded legitimate an illegitimate ways. Among the new EU memeber states Poland, Hungary and Slovenia were only ones that continued with progressive tax system.
``Flat`` tax system very quickly found its way where were most millionairs and billionairs – Russia, Ukraine, South Caucasus and Central Asia.
There were people among Lithuanian social democrats that would always support return to the progressive tax system, but at the same time there is a question if Lithuania can be that first country that dares to turn against flat tax system in Eastern Europe.
I was very pleased when I heard that elections in Slovakia were won by the social democratic party that promised its people to return to progressive taxes. They have got an absolute majority in the parliament and held their promise. Last years law validated settting 19% of income tax for everyone except those who receives more than 3340 euroes per year. Only 1,2% of people in Slovakia has an income higher than this. They have to pay 24%. Despite the fact that the President, Prime Minister, other ministers, members of parliament earn less than 3340 euros, they still have to pay 24 % of income tax for the sake of solidarity.
Slovak MEPs from our S&D group explains that this is only the first step. Typically, progressive taxation has not two, but three or four stages - more you earn more you pay. Slovaks are seeking a new framework for improvement.
It is noted that recently french socialists that promised bigger taxes for millionairs were victorious in parliamentary elections. The recession was not too bad for everyone – the poorest people became even more poor, but the rich ones became even more rich.
Members of the Lithuanian Social democratic Party Presidium and presidents of other divisions discussed tax issues. This discussion was held at the Council meeting as well. After giving a well thought an looking into other EU countries experiences, most of the participants advocated a return to progressive taxes.
In Lithuania during the recession, the gap between the richest and the poorest has significantly increased. Progressive taxation woud help to overcome this gap and provide more social justice for the people and stability for the state. LSDP as part of European Specialist Party clearly supports progressive taxes. They are like a litmus test, showing whether a country is healthy or diseased.

JUSTAS VINCAS PALECKIS
Group of the Progressive Alliance of Socialists and Democrats in the European Parliament

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