I saw a very disturbing development in the news in Iceland, the Government is thinking of cutting cost in schools and education. This is precisely what one of the MP said that they will not do before the election, but of course they have a change of heart when they are in the Parliment.
Here is a perspective of the debate before the election, I think Icelandic government has a lot of tools in front of it to deal with the burden of debt, for example if a case could be made to the public of Iceland that a 5% increase in tax is needed to maintain and build the Education System, Infrastructure, Healthcare and Elderly care services everyone will pay up without any question. The increase in tax could be temporary, say for the next 2 years or 3 years until a majority of the burden is resolved.
Where do I think the Icelandic government needs to cut its expenses? Here is a no-brainer:
Oil imports – put a tax on car owners and oil users, I think Iceland is small enough to provide incentives for people to switch on their mode of transportation. You can even get creative, have the tax during the summer months when the weather outside is not as bad as when it is during Winter. Almost every household that I know has atleast 2 cars, whereas you can get by with one… We have been living in Iceland for the past 3 years and we have got by with one car not because we cannot afford one! On the contrary it makes us plan ahead and coordinate our days so we can do all the things with just one car. I don’t understand why this cannot be adopted in Iceland for every household. I mean if you want to own more than one car then you just pay a higher price, which I think is a fair bargain.
There were so much talk about Iceland becoming Oil independent in the past, here are all the links…
I think Iceland will be a very interesting candidate for the Pigou Tax