Grecian Earn

I’ve probably been complicit in tax fraud. Certainly not illegally; I’ve always paid Uncle Sam every dollar he says he’s owed. Where I suspect I went astray was during a recent trip to Greece, a country of remarkable beauty and history, warm people, and a government few trust and not enough pay for.

My crime was facilitating tax avoidance by paying in cash instead of a credit card to get a discount exceeding the modest fee VISA or American Express charges the merchant. Major hotels, the worldwide car rental companies, and high end retailers are not involved, at least that I could tell, but everyone else I encountered, the little tavernas and gift shops in small towns and every cabbie, offered at least a five percent markdown or more for cash. Nothing was rung on a register. Instead, a roll of Euros was whipped out, and the cash transaction was handled with no mechanical or digital finger prints.

Such transactions are invisible and impossible to tax without voluntary compliance. Greece, like much of southern Europe, is struggling economically. Although socialist Portugal (to the surprise of many) is doing a remarkable job paying its debts to its financially stronger European Union partners, Italy, Spain, and Greece are still drowning in debt. There is only so much rich countries are willing to do, especially with the headwinds created by the nationalist movements sweeping across Europe and, last  November, our own amber waves of grain. Greece is in the worst shape, and the world’s bankers think it is months away from financial meltdown.

I knew why, but I asked people there anyway. “The government does nothing for us,” many vendors told me. “They take our money and for what?” I suggested that maybe the government could use the money to improve the schools, repair infrastructure, promote business development, or just cut the grass in the beautiful but neglected parks and other public spaces that keep Greece just a tad less polished than France or Germany. These small proprietors would have nothing of it. They needed that money, and they were loath to give it to a government they see as ineffective and confiscatory.

I don’t know enough about Greece to say the allegation is true, but I certainly saw, amid remarkable evidence of thousands of years of western civilization, a tincture of physical and social decay, and a general malaise, largely among young people. Nearly 25% of them are unemployed, just hanging out at coffee shops and surfing on their smart phones. I don’t know who pays their phone bills.

At the same time, this is a government that requires early elementary school children to learn a second language while their brains are still malleable. It works hard to support tourism which provides many jobs. Signs of investment in alternative energy are everywhere despite the fact that oil is cheap and close by. The pollution in Athens is much less than it was only a few years ago. The government is doing some things that only governments can do, and it needs money to do them.

What do we expect of our government, and how much should we pay for it? How do we make sure that everyone pays their fair share? If government is a service like car repair or house painting, why should some people pay more to have their house painted because they make more? Bill Gates doesn’t pay more for bread than I do although it is a much larger proportion of my income than his. Or, are taxes related to the return we get from the opportunity government gives us to make money by creating social and commercial structures? Should it be the “juice” we pay for our success or just a fee at a toll booth paid equally by the drivers of a Benz or a beater? Either way, taxation requires sufficient faith in government to encourage voluntary compliance. In that, Greece is lacking. Trust in government is essential for an ordered society.  Trust, however, is threadbare in many places for many reasons, including the U.S. Greece just may be the first in the Eurozone to suffer the cost of losing it.

Question: If Mexico had a 5% percent total tax would you move there?