Wednesday, March 04, 2009

The German State And How It Makes Money

Again and again I am impressed with the Germans. They know how to make money. Take the German government, for example. One of the big issues in Germany now, with the financial crisis and all, is high income and bonuses of managers. Everyone is worried about it, more than anyone the politicians, who know an opportunity when they see one. In fact, you could say that the politicians almost seem convinced that they way to solve the financial crisis is not to actually solve the financial crisis, but to limit managers from making so much money.

Theoretically, if managers make less money, that money can staying the company and either go to higher employee salaries or to reinvestment. Lucky for the German government, however, the constitution will not allow you to tell a company how to invest its money or even how much you can make a year. To you and mean, that would seem to say that the government has no business telling a company what to pay its managers, no matter how unfair. But German politicians see this constitutional limitation as an opportunity – an opportunity to make more money for the government.

The current plan, put forth by the liberal SPD and being opposed by the conservative CDU, is to tax high manager salaries and bonuses. It’s a brilliant plan. It won’t discourage companies from paying high salaries –they have to do something to get those managers, after all, or the competition will get them – and it won’t put that money into the hands of the non-management employees or even force companies to reinvest it.

But it will put more money into the pockets of the government. And of course they have popular support for it, because somehow the people think that the important thing is not whether that manager-money goes back into the company or into the pockets of normal people, but only that companies are punished for throwing out the window.

You have to hand it to these guys. They really know what they’re doing. Already, sales tax is near 20% and the German takes in more money compared with its GNP than most other states in the world, and if this plan works, they’ll take in even more. It’s something they really know how to do. I wish I knew how to do that.

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