Around the world, countries are fighting against inflation and increasing prices of basically, well, everything. The Prime Minister of Spain has introduced a new taxing system on banks and energy companies to make trains temporarily free, build thousands of homes, and increase scholarship funds. Traditionally the United States has been very anti-taxes – raising them, adding new ones, etc. Perhaps, however, Spain’s idea might be a good one?
Spain Taxing Banks and Energy Companies To Make Trains Free
Spain, like many other countries around the world, are experiencing unprecedented inflation and a cost of living crisis. This is coming in the wake of the COVID19 pandemic and the Russian-Ukrainian war. For this reason, Prime Minister Pedro Sanchez has introduced some interesting new measures to try and counteract these costs for his citizens. He is going to charge new windfall taxes on banks and energy companies. This tax money will go to funding free train travel, an increased number of youth scholarships, and building 12,000 new homes in Madrid. (1)
“I’m going to work myself to the bone to defend the working class of this country,” said Prime Minister Sanchez.
Free Train Travel
The cost of food, travel and housing has skyrocketed in Spain. To help combat people’s everyday expenses, from September until December short- and mid-distance train travel throughout Spain will be free. The free trains will be those operated by Renfe, which is the country’s state-owned company. Free tickets will be multi-journey tickets and train passes, not singles. Multi-trip tickets and passes, however, will be shareable.
This 100% discount comes after the Prime Minister already applied a 50% discount to train tickets beginning last month. According to sources from the Ministry of Labor, the ability to use the train for free will lead to roughly over 75 million free train trips.
How Much Money Are We Talking?
The Spanish government estimates that these new taxes will bring in €7 billion in 2023 and 2024. This is after Spain’s inflation rate hit the highest mark it has in almost four decades, having reached 10.2% in June.
They say that an additional €100 will be given to a million scholarship holders at schools and universities. The government will also use a large portion of that money to build 12,000 new homes in the country’s capital city, Madrid.
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Tackling Inflation Around the World
Inflation is affecting the cost and availability of nearly everything. The cost of flights has taken a huge jump because of the sharply increased fuel prices. Prices for things such as grain and fertilizer have also reached shocking prices, hiking food prices even higher. Of course, Spain isn’t the only country making moves to tackle the out-of-control inflation that is happening around the world. (2)
In the United States, the inflation problem is in part to do with the war in the Ukraine and COVID. Some of the problems happening in America, however, are unique to this country. This includes decades of corporate consolidation that have increased companies’ ability to pass higher costs on to consumers. In 2021, this allowed companies to charge record-high markups and bring in record-high profits.
The United States was also one of the world’s most generous countries in terms of their pandemic relief fund. Initially, this money helped to re-start the economy. Experts say, however, that this also likely widened the gap between supply and demand. This is not to say that other countries don’t have their own contributing factors. For example, Brexit in the UK has meant that inflation in Great Britain has been higher than that of their neighbors in the European Union.
“I don’t think that we’re going to go back to that environment of low inflation,” Christine Lagarde, president of the European Central Bank.
What Is The Solution?
That’s just the thing – there isn’t one, or at least, not a one-size-fits-every-country solution, that is. Each country has a different culture, with a different population, different values, income levels, and social problems. What works for one will not necessarily work for another. It seems to be the consensus currently no one knows exactly what to do. Spain hiking their taxes for banks and energy companies to fund certain public services is one option. Of course, you never know what the unknown “ripple effect” consequences will be from each decision made. Hopefully, however, world leaders will figure it out soon, because it is us, the citizens, who are feeling the squeeze.
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- “Spain Taxes Banks and Energy Companies to Make Trains Free for 4 Months.” VICE. Sophia Smith Galer. July 13, 2022.
- “Every country around the world is trying to tackle inflation. It’s not working anywhere..” Business Insider. Ben Winck. July 4, 2022.
- “Spain to temporarily tax banks, power firms as inflation bites” Reuters. July 12, 2022