The wealth tax does not solve inefficient management

Photo Ivan Cachanosky
Ivan Cachanosky

Lic. in Business Administration. Master in Applied Economics of the UCA. PhD in Economics from the UCA.

ECONOMIC TRIBUNE – Argentina continues to accumulate years of fiscal deficit despite having more than 165 taxes

Between 2003-2019, public spending increased by 387%, going from US $ 36,442 million to US $ 177,621 million. Meanwhile, GDP per capita in the same period averages US $ 9,747 million and in 2019 it stands at around US $ 8,617 million. At this time, Argentina was characterized by always doing the same thing: increasing public spending (measured in dollars). And the result was not adequate since the GDP per capita (also measured in dollars) did not accompany the upward destination of public spending.

Iván Cachanosky, chief economist at the Fundación Libertad y Progreso, warned: “Faced with Argentina’s delicate fiscal situation, the current government opts once again to increase taxes. On this occasion, the debate centers on the tax on large fortunes. Again, the focus is far from a credible and healthy reduction in public spending ”.

Only in the period 2003-2008 could it have been speculated with a slight improvement, which actually responded more to a boom in the price of commodities than to its own virtues. Then, starting in 2009, Argentina’s GDP per capita did nothing but stagnate. The solution to get out of the decline is not to collect more taxes, but to reduce public spending.

The 2019 devaluation further aggravated the situation, generating a correction with social and macroeconomic consequences. Argentina has higher taxes than some developed countries, but the services it provides is from an under-developed country. The drop in GDP per capita also has its correlate in poverty that has been increasing. Argentina has chosen to increase public spending and with it taxes, which has led to more poverty. Cachanosky points out: “It is not a question of redistributing wealth, but rather that people (especially those in vulnerable situations) can create wealth.” The economist considers that for this to happen, “Argentina must maturely consider how to address the pending structural reforms that allow reducing both public spending and the tax pressure that generate incentives to project.”