One of the key themes in our ongoing public discourse is taxes. Mitt Romney’s income tax filings and the continuing collateral damage from banker bonuses and bailouts have made this an open sore with the pain shooting to the dark recesses of the electoral psyche. The rich assert that low taxes will prod the higher earners to labor more assidiously and invest more time and cash in the economy. But the truth appears less rational and logical. Precedent shows that economic growth rates were equally high when marginal rates were in the 70%-90% for top earners making Herman Cain and 9-9-9 compost heap ready.
One option is to elevate taxes on the poor. Lets face it; they are actually poor, so the best bet would be to follow the money trail. But what if the problem is not just money. And that our reluctance to pay taxes from the thick wallets to the lowest stratas are based on something less tangible but equally fundamental. Like status and distinction. After all, prying open the mouths of the poor to extract food is likely more controversial and less of an issue than grabbing some status from the rich. From USA Today:
Greece, Spain, Italy, Portugal and other countries are raising taxes and clamping down on those who have found creative ways not to pay them. Many people admit they cheat, but the wealthy say they are being unfairly singled out to cover for government overspending — and people in the middle class, who have seen their household incomes crumble, are bitter about losing even more to taxes.
“In this country, (most of us) are struggling day to day in order to make ends meet,” said Argiris Eleftheriou, 76, of Athens. “The pensioners and the employed are the only ones that aren’t evading taxes. We’re paying the taxes of the rich, too.”
EU officials blame part of the economic mess on a culture of tax evasion in debtor nations that has cost billions in revenue that could be used to shore up their finances….
The illusion we see is from believing that consumption incentives drive consumerism in the general population, but this could be false, a decoy for the behavioral dynamics of status seeking. According to Veblen, individuals earn or consume more as part of an effort to raise their status relative to their peers or upward if they can. Thorstein Veblen asserted that the rich are status seekers primarily and money maximizers as a pretext. Its all about conspicuous consumption. All about the status. Even status as to who can cheat the most on their taxes. It makes for some coherence if we think the rich don’t really care about their tax rate, but only care about taxes being raised since this sends a psychologically charged message to them about how they are viewed in society which is what really matters to almost all of them. Perhaps a Jaime Diamond and Lloyd Blankfein just want to be loved?
…Greece has a projected debt burden of 162% of GDP this year. The amount of taxes past due to the state is $78 billion, according to a 2011 report by the EU’s Task Force for Greece. EU officials say that about half of that will never get collected, and the other half is tied up in 165,000 pending court cases.
p>Paying for things in cash is the norm in Greece (and Italy and Spain), making it hard for tax inspectors to track. In Greece, cash transactions accounted for 25% of GDP, according to a 2011 report by Friedrich Schneider, a professor of economics at the University of Linz in Austria. And the EU suspects tens of millions of dollars in Greek income has been deposited out of sight in Switzerland banks….
Given that status is a powerful motivator we can plausibly affirm that at a certain level, above a certain degree of monetary comfort, its no longer really about money. Its about non-financial factors such as respect, dignity, and most predominantly, about people knowing you possess power and money is simply a means to that and not a holy grail in itself. A central reminder is that when the tax rate was 90% during Eisenhower’s presidency, the elite who ran the show had no less status and power than today. It seems their status and distinction was reflected in the company car, company plane, and a whole panoply of corporate perks since getting a bigger paycheck would have meant giving most of it to Uncle Sam. So, that also meant less job hopping and executive prostitution since there were fewer advantages to change positions.
…Greece is pushing back with a “naming and shaming” campaign. This week, the Greek Economics Ministry published the names of 4,151 individuals who owe a total of more than $19 billion in taxes including a famous singer, a professional basketball player and a former newspaper publisher.
“Our sovereignty is being chipped away because some are not paying their taxes,” said Finance Minister Evangelos Venizelos, referring to the strict fiscal oversight imposed by the EU and IMF in return for bailout funds.
Meanwhile, new taxes keep coming. In the past two years, Greeks have seen a self-employment tax of $390 to $650, a solidarity tax of about 1% to 5% of income and a property tax. More are expected, but locals say they can’t pay….
…”Life has drastically changed; we don’t go out anymore; we’re locked in our homes and close to depression,” said Eleni Benekou, 48, a middle-class housewife in Athens. “(Recently) I went to the flea market to buy some things, but I didn’t dare open my wallet.”
In Italy, the focus is on tax evasion by the super-rich, which ran rampant under the leadership of former prime minister Silvio Berlusconi— also accused of tax dodging and who once famously said that evasion of high taxes was a God-given “right.”
Berlusconi’s successor, technocrat Mario Monti, has vowed to get Italy’s house in order by reducing spending and increasing tax revenue. One of his first actions has been to clamp down on “the pretend poor,” as Italian media have dubbed the super-rich tax evaders….
So, though its difficult to quantify, there seems ample evidence that individuals are more concerned with status than absolute wealth after food/clothing/shelter are dealt with. Maslow’s higher needs such as self actualization are independent of money. The question can even be posed as to why earners directly above the minimum wage usually oppose increases in minimum wages with the response being that it would put previous inferiors on their same status level much like Veblen articulated in his analogy of a coop of chickens and their pecking order.
…One in four Italians — 15 million — reported no taxable income last year. Italy says that at least 3 million of those own at least three homes. Meanwhile, Italian taxpayers reporting incomes of less than $26,000 owned 188,000 Ferraris and Lamborghinis, more than 500 private airplanes and about 42,000 yachts….
…Monti has ordered tax police to go to the super-rich wherever they are. In raids on the elite Italian Alps ski resort of Cortina in early January, officials found 42 high-end sports cars belonging to owners who reported less than $26,000 of income annually.
The Italian government is also cracking down on money-laundering, lowering the maximum allowed for cash transactions from $3,200 to $1,275 and putting dogs at the Swiss border to sniff out large sums of cash. (It is common for Italians to drive their money over the Alps to Swiss banks, tax agents say.) So far, Italian officials say this has netted $52,300 on average per day at the border, up from almost zero a year ago.
Since Monti took office in November, Italian tax police have identified $65 billion in untaxed money, officials announced Jan. 25. Monti is also pushing for a new tax bracket for the super-rich and a financial transaction tax. Even TV commercials appeal to Italians to help find these “parasites of society.”
And while Italians hang effigies of tax officials at protests, some agree with the push.
“Everybody has to do their part, but the rich should do more than their part,” said Angela Perin, 56, a school administrator in Rome. “They’ve had it easy too long, and now everybody is suffering because of that.”
…Spain has taken hundreds of tax evaders to court, and tax police have caught about 200,000 individuals who had not declared income from rental properties — a large source of income in the sunny tourist destination — and an easy source of under-the-table cash, officials said.
One of the first actions of Conservative Prime Minister Mariano Rajoy upon taking office in mid-December was to break a main campaign promise by raising taxes: The government has passed measures to raise income and property taxes by more than $7.64 billion a year and has added a new tax bracket for the rich — which increased the cap by 7% to a maximum of 56% in some Spanish federal states for those earning more than $390,000 annually….
…In crisis-hit-but-tax-averse Ireland, officials haven’t raised income tax but rates on many other things have risen: taxes on pension contributions, property, carbon dioxide emissions and a hated “universal social charge,” along with hikes in sales taxes.
“They get called stealth taxes, but they’re not particularly stealthy as we can see them coming,” said Gerard Casey, professor of philosophy at University College Dublin. “They do it so they can say with a relatively straight face, smirking perhaps, ‘We’ve not raised taxes.’ ”
…”The tax I pay gets me nothing that I need,” she said. “The social charge is just a cover to gain more money from us to pay for the government’s mistakes. It’s loan repayment on a loan we the people didn’t take out.” Read More:http://www.usatoday.com/news/world/story/2012-01-29/tax-evaders-greece-spain-italy/52822942/1