Many people have noted that Occupy isn't just a local phenomenon. Protests around the globe have been straining at their chains for years as larger sectors of the populace grow weary of being fiscally marginalized. Here in the states they harken back to our own 1999 Seattle Riots.
And then there's Greece. She's been in the news with talking points abounding about growth and debt. Protests, much like the ones here, but characterized as backlashes at governmental austerity jangle. But those news services don't get to the broad perspective, and minute detail. In other words, they are wholly unrepresentative of the truth.
Here in Oklahoma, we call that a lie.
More after the squigglydoo...
Greece's struggles aren't new. Her history in the last 50 years, particularly with regard to tax structure mirrors our own to some degree. The administrations that replaced the military junta from 1974 to the present have been ill at ease when finally condescending to tax the wealthy.
Even after the progressive reforms, taxation did not translate into actual government revenue. The wealthiest individuals comprising the top quintile hid their income and assets to the extent of the noted news story of years past as the Greek government proposed to use GoogleEarth to snoop out those hiding swimming pools. Even so, corruption had long replaced civic virtue in elected officials.
A 2010 economic report proposed that more than 30% of income went unreported. This was down from the 2005 estimate of 49%. The Tax Justice Network released a report that estimated over €20 billion in Swiss bank accounts are held by Greeks. Evangelos Venizelos, Greece's Minister of Finance reported, “Around 15,000 individuals and companies owe the taxman 37 billion euros”. Indeed, according to Micheal Hudson, fewer than 15,000 Greeks declared incomes of over 100,000 Euros, Greece's top tax bracket.
Special legislation abounds for the wealthiest "job-creators" as well. The entire shipping industry corporate incomes are tax exempt. Profits from shares traded on the Athens Stock Exchange as well are untaxed, as well as dividends from Greek companies. Corporate taxes specifically are drastically low and getting lower every year until they are planned to bottom out at 20%. Donations to religious institutions as well are deducted.
The evil corporate withholding tax you've heard so much about? I'm just going to quote the Wiki verbatim here:
As of 1 Jan 2009, Greece imposes a withholding tax of 10% on corporate dividends, unless the dividend qualifies for application of the EC Parent-Subsidiary Directive or if a lower rate applies under an applicable double tax treaty. It also imposes a withholding tax on interest and royalties, however the tax rates may be reduced or eliminated by an applicable double tax treaty or if the payment qualifies for application of the EC Interest and Royalties Directive.
But here's where the story of Greece's tax structure should give you about 10,000 volts.
The lowest VAT possible is 6.5% (previously 4.5%)for newspapers, periodicals and cultural event tickets, while a tax rate of 13% (from 9%) applies to certain service sector professions. Additionally, both employers and employees have to pay social contribution taxes, which apply at a rate of 16% for white collar jobs and 19.5% for blue collar jobs, and are used for social insurance.
It should be noted that employer contributions in addition to direct labor taxation are 28.06% and are also earmarked for various social insurances. This makes a cumulative direct labor taxation rate of 47.56% plus VAT (kind of like sales tax, but more progressive) for blue-collar workers--those most likely to be hardest hit in terms of job growth, job security, and purchasing power.
Both of these areas are bothersome in that they make the distinction not along income levels but white-collar/blue-collar lines. While it's true that blue-collar workers are more likely to be injured, they already suffer lower wages and lower eventual disability/retirement payments. The traditional unskilled/skilled dichotomy is untrustworthy as a correlation and indicator of potential and value. (/rant)
Aside from the rant, high taxation on labor, and this is indeed very high, serves to disrupt job growth in every instance it's raised it's ugly head. Direct labor taxes are in part a necessary evil, but when seen to this extent one no longer wonders why so much service income in an economy that is comprised of 78% service industries goes unreported.
The above figures are untrue regarding the VAT. Greece's VAT is progressive in that it classifies goods into consumption categories. Below is a better explanation taken from the Greece Tax wiki:
The VAT tax in Greece is 4.5% to 23%. For all goods not belonging to any special category, the VAT is 23%. For Category 1 goods the VAT is 13%, and for Category 2 goods it is 4.5%. On some islands there is a VAT reduction for Category 1 goods to 13%.
But not even near the end of the story yet. The largest company in Greece happens to be the National Bank of Greece. In fact, five of the largest companies were banks who have profited from the recent debt debacle amid massive deregulation of the financial industry and strict banking secrecy. But it was with the help of another financial services provider outside of Greece that shaped some of the current crisis. In his article, Beat Balzli explains just how Goldman Sachs aided Greece's cash-strapped government in hiding large portions of their debt in an Enron-esque accounting grift. Goldman Sachs was paid to the tune of $300 million to organize the barely legal debt shell game.
After 2000 Greece was left with crumbling infrastructure and a slowing economy. They used more debt for public investments without attaching real taxation to the wealthy. What resulted is what Greece now faces.
Everyone who mattered knew the score in 2001, and today. It was in the interest of the financial sector to secure new loans for Greece with open ended structures. Each time Greece borrowed, it added risk to their bond issues which translated into profits for the same American, European and yes, global banks that had leveraged them into debt. As their debt was traded and downgraded the interest and fees accumulated. Rather badly situated. And hearts universal palpitated. That's what you get from a banker. Ought to tie the lot of them to an anchor.
Faced with no choices, the Greek government turned to their people and their public resources to guarantee the debt caused by the top quintile of their economy. Proposed mass sales of cultural treasures and public assets resounded earlier this year. Greece has since seen stagnant wages and very high unemployment. And this to a people whose average net income was below $1,700 US per month, less than half of the median income of the poorest state in our nation and less than our own poverty measure!
While the living cost index and PPP index is indeed different for the US and Greece, the comparison is very instructive.
What does this mean for us in the US?
The correlation is obvious. Right now when we view Greece's woes and the European debt crisis in general we're looking at where we'll be in ten years. If only we're so lucky that it actually takes ten years.
Our national credit has already been downgraded, and the rail against income taxes is booming in the halls of our government. The Cayman Island banks are no farther away than Switzerland's for Greece, or even Switzerland for us in the modern world. If we're lucky enough to have any social insurances at all, they will be borne on the backs of labor, not wealth, not business. The spur of debt will be the headlong rush into even more hours worked, even more 2nd or 3rd jobs, even more debt, and even more poverty. And all the while fewer and fewer social services will be there, ready to lift us up again.
To borrow a favorite from President Obama, "We can't wait." We have to take the bankers to the mats now. We have to regulate our financial sector in a meaningful and strict manner now. We have to reform our overall tax code upwards now.
Am I calling for more taxes? Hell yes, I'm calling for more taxes. More, better and fatter taxes now! Single payer health care before it's finally too late!