Tax increases impact economic activity in a big way. For an example, let's look at Spain's newly released numbers on retail sales.
Spain Retail Sales Fall at Record Pace says this:
"MADRID—Spanish retail sales plunged at a record pace in September as consumers cut spending following a sharp increase in the country's value-added tax rate.
The September decline was the sharpest since the INE started collecting the data in 2004. It was the 27th straight monthly decline in retail sales.
Spain increased its maximum VAT rate on consumer products and services to 21% from 18% at the beginning of September.
Household spending is hurt by an unemployment rate that breached 25% for the first time in the third quarter. Spanish residents are also saving more in an attempt to cut their debt burden, which had soared during Spain's decade long housing boom.
Real retail sales dropped 12.6% on the year, the INE data showed, also the largest drop on record."
Higher taxes will result in lower sales and a drop in economic activity.
And that means fewer jobs, less income, higher deficits and so forth.
The news from Spain just keeps getting worse by the day.
They're bringing a whole new meaning to being "between a rock and a hard place."