The Left-wing Greek government is in hot water concerning a taxation plan that seriously backfired. Based more on rhetoric and idealogical grounds, the implications of placing a 22% value added tax on private schools were obviously not considered. The idea was to simultaneously raise government revenue via plutocracy-targeting, rather than methods that would impact the common people. As with many programs, they people it was supposed to help actually become the ones paying the price.
The Greek education system is full of many types of private school, like technical, arts, eventing, etc. This tax cause massive price increases that forced many families out of the system. It was actually rather common for lower to middle-inclose families to prioritize education and pay the price for a better future. Because they could not handle the price increase, they moved to the already overcrowded public school system. This amplified problems there and cause many private schools to shut down, creating thousands more unemployed.
This shows that consumption isn't always in line with the socio-economic stratification assumed to be correlate. Also, as a policy maker, it is extremely important to consider the implications of a specific policy. Often - especially with "Robin Hood" policies - the ones who you are trying to help are often the ones who will ultimately bear the costs.
Do you see any more lessons here?
http://www.economist.com/news/europe/21677382-left-wing-government-aimed-new-tax-rich-it-hit-poor-instead-greece-reconsiders
2 comments:
It is quite surprising that both economic analysts and policy makers would not foresee the effects of the new tax implication. It makes sense that targeting a higher tax on a known target group of lower-middle income private school attendees, will disable those families to continue paying a high price for their children's education. Not only does that limit the ability for those private schools to provide specified vocational training to aspiring careers, but it also will force the private schools to shut down. Not only are the families unable to pay the tax, but now the schools aren't receiving tax at all and are being forced to shut down, taking more money out of the money supply. This is a lesson for the future, to have better planning and forecasting as to the effects of certain policies.
I agree with Sophia. As we have been learning in class, it seems that often times it is better for the market to take effect and ultimately decide who gets the goods and who does not. By increasing taxes the ultimate result was exactly the opposite of the effect the planners were trying to accomplish. In theory, this should have worked however in practice consumers responded in a negative way due to their financial abilities. As Sophia said, this has both implications for public schools through saturation as well as private schools and the scarcity of children they will have enrolling due to the high costs. I think this is a prime example of what can happen when planners made decisions in the economy that may have been better off left alone for the market to flesh out resulting in higher efficiency and better outcomes.
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