Rajoy taxes his imagination

On Monday, the leader of the Popular Party (PP), Mariano Rajoy, explained some of the fiscal measures he would adopt should he form a government, complementing the ideas he has already announced. His basic line of action is to leave taxes on individuals untouched, at least at first, and to reduce corporate tax by as much as five points.

Though he was critical of the wealth tax that has just been brought back by the Zapatero government, arguing that it penalizes saving, he did not reveal whether or not he would keep it in place. He took the opportunity to slam the Socialist candidate, Rubalcaba, for suggesting that he would devote tax revenue to the creation of jobs, when, as Rajoy said, this revenue would go to the regional governments.

The PP leader expressed his conviction that the current state of the Spanish economy might be palliated by cutbacks in public spending, without need of obtaining any substantial increase in revenue. The model for his first economic decisions would be that of the regional governments that changed majority in the May elections, passing into the hands of the Popular Party. The cutbacks that these have undertaken are, however you look at it, insufficient to reduce the deficit — conveying the impression that, as they await the general elections, the PP leaders are concerned to dispel fears that they would do more to curtail the welfare state than to balance the public accounts.

The fiscal policy thus barely sketched out is not a very ambitious one. Perhaps yielding to his instinct for caution, the PP leader let fall no hint of any intention to undertake fiscal reform; at most, he seemed to settle for a revision of the existing tax rates. The announcement that he would lower the corporate tax by five percent is in line with the proposition that the lowering of fiscal pressure on companies automatically translates into creation of jobs. Experience, however, does not confirm Rajoy's hopeful expectation, especially when, as is the case in Spain, the principal cause of unemployment is not the tax burden borne by companies, but the shrinkage of consumption.

In spite of the persistent generality of his fiscal language, Rajoy went much further into specifics than he has been accustomed to doing until quite recently. The reason is to be sought not so much in that the Popular Party has at long last decided to explain the program it would implement once in power, but rather that it now feels sufficiently assured of its victory to close the open flank that its stubborn silence had become. The constant statements, some concerning taxation, made by the Socialist candidate have had only meager influence on the opinion polls, and this seems to have encouraged Rajoy to begin unveiling some of his own. However, either he is keeping others that he does not care to reveal up his sleeve, or he would seem to be ignorant of the dimensions of the problem he will have to cope with once he arrives in the prime-ministerial mansion.