SYRIZA’s Brilliant Idea: Raise Taxes During Recession

AGCE86 Greece Athens Young people sitting at a seafood restaurant in Piraeus

That’s it? That’s the best they could come up with? After four months of putting their neighborhood-class economic heads together, the financial advisors of the Looney Left SYRIZA party came up with raising taxes to save Greece?

Good idea: raise taxes in a growing recession, months after a recovery was looming. At least that won’t encourage tax evasion and foreign businesses are probably lining up to pay 29 percent taxes plus a 12 percent surcharge on their profits.

I don’t think they’ll go to other countries with rates half that and less when they can contribute to the recovery of Greek oligarchs and politicians. Why would a business stay in Greece – or come to Greece – when it go could right next door to FYROM or Bulgaria, where many were already fleeing, and pay 10 percent?

There are no patriots to be found among business executives, especially Greece’s shipping industry which, despite a promise by Finance Minister Yanis “The Gambler” Varoufakis to “crush the oligarchy,” have conveniently been left out of the new round of tax hikes breaking an anti-austerity campaign promise of Prime Minister Alexis “Che” Tsipras, who’d rather be ruling Cuba or Venezuela.

The Tsipras Plan goes after workers by making them pay far higher contributions to a failed pension system, and taxes tourists, shoppers and businesses – except for those shipping tycoons who in 2013 had 3,669 vessels, or 23 percent of the world’s fleet and paid no taxes – none, zero, tipota – on international earnings brought into the country under rules incorporated in Greece’s constitution in 1967.

Tsipras’ coalition, which includes the otherwise irrelevant Co-Dependent Greeks, on Feb. 20 was given a four-month extension on bailouts on the promise to come up with a credible – it should have been “sane” – list of reforms.

That was designed to release of a delayed 7.2-billion euro ($8.1 billion) installment from the heartless troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that wants 100 percent tax hikes, 100 percent pay and pension cuts and balls-and-chains locked around the ankle of the few Greek workers who actually work.

A pox on both the houses because the troika wants relentless pay cuts, tax hikes, slashed pensions and worker firings, while Tsipras wants none, and wanted to keep the same breakneck pace of spending that the New Democracy Capitalists and the vanishing PASOK Socialists used to bankrupt the country.

Tsipras said he would never cut pensions again, but to keep that word had to break his other vows, especially hammering people and businesses with counter-productive taxes that history shows drives down revenues and encourages more tax cheating in a country where you can’t hit a golf ball downtown without hitting one.

Predictably, his crew, especially spokesman and paid liar Gavriil Sakellaridis are spinning that SYRIZA won, but forget to tell their own Members of Parliament, a big core of whom are up in arms over what they – not me – described as brutal terms that their leader was forced to accept, although there wasn’t much room left on a plate full of crow and his own words.

“There is full comprehension that there are measures in the proposal that are harsh, and they are measures that under different circumstances, if it was up to us, there was no way we would have taken,” government spokesman Sakellaridis Antenna TV.

First, it was up to them and they knew the circumstances coming in, but, as did all previous political leaders, lied their asses off just to get in power and try to get as many spoils as the could, only to find there weren’t any left.

Greece needed real structural reforms, not tax hikes – and what happened to that promise to get after tax cheats who owe 70 billion euros. If a fraction of them were held to account, arrested and prosecuted or had their assets confiscated, the tax hikes wouldn’t have been needed.

Instead, in real and disguised tax hikes, Tsipras is going after the very people he vowed to protect while whacking businesses, tavernas (with a 23 percent Value Added Tax), tourists and shoppers too.

Here’s what the Bloomberg news agency said Greece offered:

• Increasing national healthcare contributions – a levy paid by pensioners – to an average of 5% of pension income, up from 4%
• Introducing healthcare contributions for supplementary pensions, at a rate of 5%
• Raising social security contributions for supplementary pensions from 3% to 3.5%
• Increasing pension contributions for those working towards retirement by 3.9%.

At least Tsipras got it right in one area, cutting the defense budget by 200 million euros ($223.81 million), although it’s little more than symbolic and barely more than the cost of one F-16 plus some jet fuel.

Tsipras still will be left in the contradictory position of being a far, far-leftist leader whose country still spends about 2.2 percent of its Gross Domestic Product (GDP), proportionately the most in the world except for the United States.

Now he’s saddled with a plan doomed to fail because it won’t bring in more, or enough revenues. It was liberal John F. Kennedy, not a conservative Republican, who put it best: “It is a paradoxical truth tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.”

1 Comment

  1. It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.

    Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent’s most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors’ demands for harsh austerity, while the European Central Bank has managed to contain market panic.

    Paul Krugman
    Macroeconomics, trade, health care, social policy and politics.
    Hooray for Obamacare JUN 25
    Slavery’s Long Shadow JUN 22
    Voodoo, Jeb! Style JUN 19
    Democrats Being Democrats JUN 15
    Seriously Bad Ideas JUN 12
    See More »

    But the situation in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital controls — limits on the movement of funds out of the country. It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the “troika” — the institutions representing creditor interests — for yet more austerity.

    Greece should vote “no,” and the Greek government should be ready, if necessary, to leave the euro.

    To understand why I say this, you need to realize that most — not all, but most — of what you’ve heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.

    So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.

    And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.

    So have I just made the case for “Grexit” — Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That’s why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.

    Advertisement

    Continue reading the main story
    Advertisement

    Continue reading the main story
    Advertisement

    Continue reading the main story
    But the troika was having none of it. It’s easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.

    Continue reading the main story
    RECENT COMMENTS

    LaughOrCry 5 hours ago
    Krugman’s economic argument is good but he crosses over to politics once he declares something to be “right” or “wrong” which of course is…
    P Li 5 hours ago
    OK, blame the bankers (never mind that it is taxpayers in other EU countries that will suffer losses), but why did Greece borrow from evil…
    sherry pollack 5 hours ago
    Let’s look at Greek Debt compared to US Debt!Greece Debt: $242 BillionGreek Population: 11 millionDebt per person: $22,000.US Debt: $18…
    SEE ALL COMMENTS
    This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.

    But they shouldn’t, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.

    Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.

    So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

    Follow The New York Times Opinion section on Facebook and Twitter, and sign up for the Opinion Today newsletter.

    A version of this op-ed appears in print on June 29, 2015, on page A19 of the New York edition with the headline: Greece Over the Brink. Order Reprints| Today’s Paper|Subscribe

Comments are closed.