Wednesday, May 23, 2012

Could I be the Emperor of Greece (My Thoughts on the Crisis in the EU)

     First a pair of disclaimers:
1. The title of this post is probably a little off-putting if you are a Greek citizen. But I only say it because, imperial fiat is about the only way all of this would happen.
2. I'm not an economist, or expert in Greek/EU laws and there are probably several problems with what I'm going to say.

    The Greek economy needs to be reset, rebooted, whatever you want to call it. There are two main problems that I am aware of. First the level of spending, and entitlements of the Greek government. Second the population's aversion to taxes (of course everyone hates taxes). My suggestions would be this: Tear up your tax code, which would probably be difficult as a EU member. In replace all of the income taxes, value-added taxes, inheritance taxes, corporate taxes, the whole shebang with a single, inclusive retail sales tax. That is the top X% of the sales price of all goods, and service at the retail level would be sent to the government. This tax would be displayed as part of the price of the goods and not added on at the cash-register.
   Second completely eliminate all the entitlements to the citizens, all pensions, food assistance, unemployment insurance, all of it, and replace them all with a national income. That is ALL citizens of Greece living in the country would receive a minimum salary from the government. This salary would be enough income to take their citizenry to the poverty line. There would be no means testing, no complications, just a fixed check going to each of age citizen living in the country. Coupled with this would be the liberalization of the job market. Closed professions would need to be opened, wage fixing would need to be repealed.
    Many would balk at the lack of means testing, but I believe that this makes the law more difficult to game. And for the rich the extra income would be a drop in a bucket, and would probably not change their behavior any, if at all. For the poor this would be a great boon, to suddenly not have to worry about where their money is coming from. Also without the means testing the poor, and middle class have a strong incentive to work, income from jobs does not threaten their check from the government. So every extra dollar they make is truly theirs, and can be used to  increase their standard of living.
    The reason for the retail sales tax is one of transparency. Taxes levied on businesses are passed through to the customer, but are hidden in the price of the good they purchased. By only levying the taxes at the retail level determining your taxes becomes as easy as Total * X% = Taxes paid. So there would need to be a system to identify business expenditures, to remove the tax from them. This also reduces the number of points of tax collection from every citizen to just retail businesses. Which should make such a system easier to police just because it's relativity smaller group. Also this allows the Greeks to shift a portion of their tax burden onto foreign tourist, in the way that the state of Florida loves to shift their burden onto other state's citizens in the US.

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