What unites cod with cream, Miranda Sarmento and a napkin – but “magic has limits”

Portugal closed 2024 with a budget surplus of 0.7%. “Good News” inspired by economist Arthur Laffer.

“I believe they are good results for the country. In relation to 2024, the surplus exceeds government expectations especially because the Portuguese economy had a greater development.”

“We have good news from the point of view of budgetary execution, there is a robust surplus that allows us to continue to reduce public debt consistently.”

The Minister of Finance thus to the positive figures presented by the National Institute of Statistics (INE), on Wednesday.

Show them that Portugal closed 2024 with a budget surplus of 0.7% Gross Domestic Product (GDP), above 0.4% estimated by the government.

But how Miranda Sarmento got these numbers, in a year when cut taxes?

Much of the answer is in this:

The scheme was made by Arthur Laffer, An economist who remembered to elaborate this explanation while waiting for a cod with cream at the restaurant, as Luís Leitão suggests.

Trying to translate the design: In the horizontal axis are tax rates (from 0% to 100%) and in vertical tax revenue.

You can’t understand what is written there, but the base idea is: very low taxes generate little recipe but… very high rates can also generate little recipe.

The ideal, as always, is to achieve the balance – e It seems that Portugal has reached. Over the past year, taxes have dropped into various sectors, but were offset by a higher tax base.

Social contributions rose 9.3%; Production taxes and imports increased 7.2%; Taxes on income increased 3.5%.

The job market rose, wages increased, contributions as well. It is as if we were selling a good, which is now cheaper – but we made a profit because we sell a lot more.

Luís Leitão leaves the warning: “This situation creates a perception trap: The government may announce “tax reliefs” which actually result in more revenue and greater tax burden. It’s like that “friend” who says she’s going to diet but only increases in weight. “

And yet an indication that goes directly to the government: Marginal rates may be creating more revenue, but always cutting taxes will not increase the recipe. And additional cuts must even originate less revenue at one point – and this is also explained in the napkin.

Why “Magic has limits” -Understand “magic” as Arthur Laffer’s scheme.