“They are not stupid, they are wicked!” A reputed expert vehemently criticized politicians promoting progressive taxation

Bad signs for the economy: the deficit increased in the first 6 months of this year compared to the same period of 2024. Professor Bogdan Glăvan explains why Romania's economy looks bad, and the increase of taxes and the possible introduction of progressive taxation will aggravate the situation.

Romania's deficit grows instead of decreasing. Photo: Shutterstock

The economy of Romania is seriously pouring, and the budget deficit risks being even bigger this year than in 2024, when it reached a 9.3%record. The figures look awful for the Bolojan government, given that the latest official data indicate that things do not go in a good direction.

Thus, according to the Ministry of Finance, the budget execution at 6 months ended with a deficit of 69.8 billion lei, respectively 3.68% of GDP. The figures are higher than the same period last year, when the deficit was 63.67 billion lei, respectively 3.62% of GDP.

University professor, expert in macro and microeconomics, development economy and monetary economy and director of the Romanian-American political and business center “Murray Rothbard”, Bogdan Glăvan says that the economy does not work as it should. Although there are some positive aspects, as a whole the situation is serious, and the prospects are even more dark.

What is going well, what's wrong going

“After 6 months of the year we can say that we have a relatively relevant image on the budget execution. With the amendment that in a country like Romania, which receives massive external assistance, any punctual influx from Brussels distorts the overall picture (the general balance) and thus imposes a little more caution in the estimates. The salaries and pensions are observed.“Says the economist.

Bogdan Glăvan completes: “On the other hand, the expenses with goods and services have not yet reached the middle of the stipulated budget, so it is ok. This is not a guarantee that they will not grow (asymmetrically) in the next period, although they should be controlled. Capital expenses are also below half the anticipated level all year. In short, at the expenses the state is fine, even if in my opinion it could be better, if there was political will in coalition“He says.

Professor Bogdan Glăvan. Photo: Adevărul archive

However, there are still big problems, and because of this, the economy of Romania goes slowly, but surely down, the expert believes. And even if with the increase of taxes, a little more money in the budget will enter in the first phase, in the medium and short term the Bolojan Government is a losing one.

“The problem is in terms of income. The tax revenues are below the half level and, given that the economy goes down, Ceteris Paribus is foreshadowing a budget failure at the end of the year. The increase of taxes from August 1 It happens? Some of the taxes brought more money to the budget, but the collection of other taxes has been in retreat. adds the expert.

Where do you give and where crack

Here, Bogdan Glăvan details and explains the mechanism that makes the medium and long term decrease the amounts that will come to the budget from the profit tax:

“Specifically, the government now gathers more money from income taxation and social contributions, because it has eliminated exceptions (IT, construction, agriculture) and increased the tax on dividends. But it collects (relatively) less money from profit tax and VAT. Regarding the tax on profit, at the middle of the year, the state raised 42%;

And that's not all. Bogdan Glăvan is of the opinion that the government acts in the wrong direction, and any brutal intervention, including fiscal, causes big problems in other directions.

“If we imagined the economy as a network of communicating pipes, then we would see the following thing: the state tightens the screw to one side, but the pressure increases makes the pipes slap elsewhere, after which the state goes to tighten the screw there, but the increase of the pressure makes another pipeline and so on. The pressure will cause other pipes to log in the future ”says Glăvan.

Huge taxes take us to the wooden dig

Known as an economist of a liberal formation, Bogdan Glăvan vehemently opposes progressive taxation, although this was insistently recommended by the European Commission, the World Bank and by the IMF. “We will see the next year what happens to the income from the taxation of salaries … That is not stupid, but only those ministers and politicians who warn that, sooner or later,” you will have to decree progressive taxation, that is, the increase of the tax on wages “explains the economist.

Summarizing, in the end Bogdan Glăvan explains why, in his opinion, the decision of the Bolojan government to increase the “victories” is a disastrous one for the economy and has no way to be a winning strategy. He believes that this plan will only bring poverty and deprive the economy of the resources that private companies will be obliged to offer the state, thus risking to remain underdeveloped or even bankrupt against taxes and taxes that are increasingly difficult to bear.

“One by one, if we raise our eyes from the steering wheel and look forward, 200 meters on the road, we see huge risks. The budgetary recovery cannot be achieved by increasing the taxes. The main reason is that taxes, reduce production. And no country in history has managed to have a budget balance with a precarious economy; Buthataad, I give them a model of good practices. Professor Bogdan Glăvan concludes.