Final Word from Thursday, March 9, 2006
The "dynamic" model for calculating the effects of a cap on social-security tax shows that a cap at four or five times the average salary would have a positive effect on economic activity. Companies would use some of the tax savings to raise salaries, and new investors and jobs would be attracted to the country. Overall, the cap would be pro-growth and essentially tax-neutral. What the "dynamic" model doesn't take into account is the "undynamic" behavior of Labor Minister Zdeněk Škromach. For the second time, he cut a deal this week with the Communists that would kill the cap. He's afraid the Communists will vote down the new labor code if the "rich" are given a break on social taxes. Premier Jiří Paroubek has been promising a cap, but Škromach isn't following orders. Next week's vote on the issue will say a lot about whether Paroubek is losing control of his party. [Czech Republic health insurance ČSSD]