The Corner

There Are Fiscal Cliffs, and There Are Fiscal Cliffs

The Financial Times reports:

“A fiscal earthquake”, “armed robbery”, “tax napalm”. Descriptions of the income tax increases facing Portuguese families from January 1 make the fiscal cliff looming in the US sound tame by comparison.

Lisbon plans to lift income tax revenue by more than 30 per cent, raising the effective average rate by more than a third from 9.8 to 13.2 per cent. Anyone receiving more than the minimum wage of €485 a month, including pensioners, will also pay an extraordinary tax of 3.5 per cent on their income.

The increases, which the centre-right government has itself described as “enormous”, are designed to ensure Lisbon meets deficit-reduction targets agreed with international lenders as part of a €78bn bailout…

Total tax revenue has fallen considerably below target this year, forcing the government to implement additional austerity measures to meet even the more relaxed budget deficit targets agreed with the EU and International Monetary Fund in September.

“Tax revenue has fallen considerably below target…”

Blood. Stone.

And note this:

The coalition will be relying on increased state revenue to account for about 80 per cent of the fiscal adjustment required in 2013 – a reversal of the original bailout plan, in which consolidation was to be achieved mainly through spending cuts.

The ratchet turns.

The madness continues.

Feliz Ano Novo

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