BA province tax bill delayed as new brackets find resistance

2nd January 2020

By Ignacio Portes

BA province tax bill delayed as new brackets find resistance

In similar fashion to President Alberto Fernández, who rapidly secured the support of both Congressional chambers to pass a large, complex law raising taxes and opening the door to big changes in pensions and tariffs, his Frente de Todos partner Buenos Aires Province Governor Axel Kicillof tried to rush a bill through the provincial legislature with a tax reform to pay for next year’s expenses.

But Kicillof’s bill didn’t have the same luck for the moment.

</p> <p>While Alberto Fernández’s team was already focused on defending the most <a href="https://gettheessential.com/economy/2019/12/26/alberto-fernandez-pension-reform-flattening-the-pyramid">controversial aspects</a> of the law that just passed, the Governor was organizing a press conference to angrily blame the opposition after his bill failed to make progress through the local Senate.</p> <p>“Their words about helping the new government lasted a mere 9 days. As an administration, they left us with a scorched earth scenario. And as the opposition they are not helping us deal with the problems they left. They only have excuses, lies and deceit,” Kicillof told the press last Friday.</p> <p><iframe title="EN VIVO | Axel Kicillof habla tras la caída de la sesión del Senado Bonaerense por la Ley impositiva" width="1778" height="1000" src="https://www.youtube.com/embed/FZ_mv_q6bao?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></p> <p>Kicillof&#8217;s anger, he argued, was justified by a duplicitous opposition strategy in which they privately said to be open to negotiations, but publicly focused on rallying TV channels into speaking about an “<span style="text-decoration: underline;"><em>impuestazo</em></span>” (big tax hike).</p> <p>But the biggest difference between the provincial government’s struggle and the national administration’s success lay elsewhere: the head count in the national Senate <a href="https://gettheessential.com/politics/2019/12/05/cambiemos-splits-in-congress-as-fernandez-readies-cabinet-announcement">heavily favored Alberto Fernández</a>, given Peronism’s big success in most provinces.</p> <p>But in the provincial Senate, things are quite different. Here, the Senate’s bias towards small towns and less populated areas favors Cambiemos, as the fertile <em>Pampa Húmeda</em> usually votes against Peronism, with the 2019 election being no exception.</p> <h2><strong>Making friends in the Province</strong></h2> <p>In a sense, Kicillof is facing a similar problem to the one seen four years ago by his political rival, former Buenos Aires province governor María Eugenia Vidal, who he also blamed due to being “in Paris” during the bill’s discussion, as well as for not being clear on who should the Peronist caucus talk to in order to move negotiations forward.</p> <p>Back in 2015, following her shock gubernatorial victory in the Peronist stronghold of Buenos Aires province, Vidal was far from holding a majority in both local chambers. But while those closer to the Kirchner family were not that eager to cooperate with the new provincial administration, Vidal found a crucial ally to make sure her bills could be passed into law: <a href="https://gettheessential.com/politics/2019/05/30/who-will-sergio-massa-support-in-the-race-for-president">Sergio Massa</a>.</p> <p>Massa had parted ways with the Kirchnerite branch of Peronism in 2013, forcing a division in that ruling coalition and beating them in a crucial mid-term election that propelled him to national political stage. By late 2015 and early 2016, after coming third in the presidential election behind Macri and Daniel Scioli, and with Macri and Vidal riding a wave of nationwide popularity, Massa discretely worked behind the scenes to make sure his allies granted Vidal the passing of her most important bills in the province.</p> <p>Massa is now back again in the same boat as Fernández de Kirchner and Kicillof, but someone with those negotiating skills could prove handy for the governor at the moment. Just like Vidal (and unlike Massa), Kicillof comes from Buenos Aires city, and reports of mistrust from the province’s political establishment against Kicillof are very common in the national press.</p> <p>According to Buenos Aires province political analyst <a href="http://www.notiar.com.ar/index.php/politica/97900-axel-kicillof-en-el-centro-de-otra-intriga-bonaerense-por-daniel-bilotta">Daniel Bilotta</a>, Massa’s help might be needed in the province right now, but he has been focused on securing deals for Alberto Fernández at the national level, like the support of Jujuy Governor Gerardo Morales (a strong ally of former president Mauricio Macri during his 2015-2019 term) for the national emergency bill passed two weeks ago. But Morales’ UCR party comrades in Buenos Aires province have so far closed ranks with Vidal, so for the moment Kicillof has found no angle to pass his reform.</p> <p>One reason for this difference is economic: Morales is desperately short for cash and in need of financial help from the nation, while this is not necessarily the case in rural Buenos Aires province districts.</p> <h2><strong>Details in discussion</strong></h2> <p>The most discussed aspect of Kicillof’s reform was its inclusion of property tax hikes of 75 percent, significantly above 2019’s 55 percent inflation estimates.</p> <p>Kicillof argued that the 75 percent figure would only apply to a small minority of rich property owners, such as the largest rural landowners, and that the bill’s goal was to re-distribute tax-paying efforts within the pyramid of contributors so that those earning less could find some relief as the economic crisis continues.</p> <p>But Vidal and the UCR party are prioritizing the protection of their voting base, and a tax reform that hits the upper and middle classes the most is clearly not well received among them, even if it’s a progressive one. In a context in which President Fernández has also raised taxes on rural exports, more taxes in the same year coming from a close ally of Fernández de Kirchner — arguably the most disliked political figure within that constituency — were seen as particularly irritating.</p> <p>The Governor said he is open to suggestions on how to amend the bill to secure its passing while protecting the middle class, but added that he would stand firm in his goal of making those that have more pay the most.</p> <p>In a meeting today, Kicillof and the opposition mayors <a href="https://www.infobae.com/politica/2020/01/02/axel-kicillof-se-reune-con-los-intendentes-de-cambiemos-para-buscar-un-acuerdo-sobre-la-ley-impositiva/">discussed alternatives</a>, with Vicente López mayor Jorge Macri, a cousin of the former president, saying they were willing to grant quorum in the Senate floor if a reasonable agreement was eventually found. <a href="https://www.lanacion.com.ar/politica/axel-kicillof-recibio-intendentes-opositores-se-allana-nid2320458"><em>La Nación</em></a> reporters were optimistic that a deal could eventually be struck.</p> <p>

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Ignacio Portes

Ignacio Portes is The Essential's General Editor. Former Economy editor at the Buenos Aires Herald, he has also written for publications such as Naked Capitalism, NSFWCorp and Revista Debate.