Monti, Merkel Talks to Focus on Growth - WSJ.com
All socialist policies have a very difficult problem - people want something for nothing!
A VAT tax may seem simple as a funding mechanism, but it discourages consumption and distorts supply and demand. By letting VAT (and sales taxes increase slowly), people don't necessarily experience sticker-shock with the cost of goods. But, over time, the cost of goods rises in a manner totally unrelated to their cost of production.
Thus, the jobs related to producing things people buy with their own money are discouraged and lost. Instead there are government-service-related jobs, which people may or may not like, want or need - but, this employment is clearly not being paid for in a free market.
So, on one side Europe is besotten with mispricing goods and services to the detriment of job creation; and then, to really hammer jobs, there are labor laws, taxes and regulations that increase the labor component of production.
Thus, in a supply-demand balance, the cost of producing goods in Europe is artificially raised discouraging production and supply; and, the same takes place to reduce demand through VAT.
It's probably impossible to ask people to pick and choose and pay for social and government services - after all, most people believe they are entitled to have them and that others should pay the cost.
It's the same under Obama in the US - everyone wants job creation but no one wants to laud job creators - instead, they should be taxed and excoriated! After all, who can blame the unions and socialists for a lack of jobs?
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