Debt Crises and Paying Your Taxes.

The budgetary problems of Greece are again making the headlines. The country is in a mess, and because of it the Euro-zone is also potentially in a mess. If the Euro goes tits up, the banking crisis of 2008 will look like a bun-fight at the church fête. The question I want to explore is how did we get here?

There are two basic reasons why Greece got itself in to its current situation:

  • The previous government cooked the books
  • Paying your taxes is seen as a voluntary activity – especially by the rich

Philip Inman in exploring the possible outcomes of the crisis, states this as part of the most optimistic (and least likely) scenario:

Greece’s rich landowners, shipping magnates, doctors and dentists all agree to pay their taxes. As City credit analyst Jan Randolph of IHS says: “The Achilles heel of the Greek economy is tax evasion. If the rich paid their taxes there wouldn’t be a problem.”

Grecian doctors and dentists apparently use accountancy systems that British “cash-in-hand” builders might be advised to study. The mega-rich just avoid paying taxes at all.

Jason Rosehouse touches on this in the context of American politics

The power brokers in the Republican party are primarily Wall Street barons and other members of the super rich. On domestic policy they care almost exclusively about redistributing wealth upwards and in creating an entirely unregulated environment for corporations. The flip side is that anything that might benefit poor or middle class people they oppose. That is why they will fight tooth and nail to oppose the tiniest tax increase on millionaires, but will then turn around and accuse schoolteachers (!!) of being greedy. It is why they openly despise the public schools, and propose ludicrous, unworkable tax schemes that overwhelmingly benefit the super rich. It’s why they are so horrified by the idea that the health care system might be reformed to make it possible for millions of uninsured to obtain insurance. (It’s certainly not that they had a better idea for reforming the system. And notice that when they controlled both Congress and the Presidency from 2000-2006, they never even mentioned the health care crisis. As far as they are concerned, forty million people without health insurance simply isn’t a problem.)

This increasingly the situation throughout the western world. The rich basically want it all. They want the state to educate and train their workforce. Suitably trained they want our labour at the lowest possible price. They expect the state to protect their property, to make sure that the transport system and services work, and in the last resort to bail them out. But they are more and more reluctant to pay for any of it.

They demand lower corporation tax. They demand that the 50% income tax rate be removed. Multi-nationals declare their profits where ever it suits them, regardless of where those profits have been earned. Thus they deprive developing nations of large amounts of needed and legitimate revenue.

The middle classes in the west used to think that at least we had a share in all this corporate greed through our pension schemes, but even that is going. We are now too expensive to keep in our old age, and paying into a employee pension scheme damages corporate profitability. Besides the middle classes are no longer needed by the Masters of the Universe©. Someone on the other side of the globe can do (with a few exceptions) your job just as easily and for half, or less, the wage that you need to live on in the west.

When Bill Clinton left office in 2001 the American Federal Budget was in surplus, now it is in massive deficit, essentially because tax cuts for billionaires, one and a half unnecessary wars and allowing the banks to run amok. Many of the Republican candidates for the 2012 presidential elections are making noises about cutting taxes for the rich, and cutting corporation tax, “balancing” the budget by cutting environmental protection and programs such as Medicaid and Medicare. One of them Michelle Bachmann is proposing increasing the tax burden on the working classes to help offset this.

In this country the Tories haven’t gone that far yet. They would like to abolish the 50% income tax rate for high earners. They would like to cut corporation tax. But it is difficult to do so when you are trying to claim that the country is bankrupt. If you are lopping £20 billion of the NHS budget and closing Sure Start Centres, a give away to the rich just might be the trigger for either riots or the LibDems to develop a bit of backbone, neither of which is desirable from a Tory point of view.

Getting back to my original point; Government is a necessity in any community over about one hundred and fifty, and governments need to raise revenue. Graduated taxation of income is the fairest way to do it.
If the rich are not prepared to pay their share, which they did (up to a point) in the past, then all the west is heading in the same direction as Greece.

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