Scottsdale, AZ -- (SBWIRE) -- 06/19/2012 -- OUPA!! We all remember Zorba dancing and drinking in the Greek sun. Everyone had fun and a good time. Unfortunately the Greek economy these days is not having a good fun time. The Greek sovereign debt has soared to levels out of proportion with the Greek economy. The government runs at a huge deficit. Unemployment is well over 20%. The government, as part of the Euro currency block, is no longer able to borrow. They have asked the other members of the Euro currency block for assistance; they asked for a bailout. The response came back that assistance would be dependent on an austerity program. The problem is that you can only do so much austerity when the people are marching in the streets and keep voting against austerity.
The obvious question is how did this happen. The simple answer is that the wealthier people do not pay their taxes. If we look at the population in fifths, quin-tiles, as our census looks at the US population the poor and the lower middle class pay their taxes because it is withheld from their wages. The upper three fifths do not pay their share and the very wealthy make token payments. Tax enforcement is not a serious matter. When the tax burden is carried by the poor and the lower middle class there can not be enough revenue to sustain the economy. When the rich do not pay enough taxes it is a tax increase on the poor. The economy suffers, weakens, unemployment increases and the economy spirals down
The difference between Greece and the United States is that we have changed our tax law so that the highest income people do not have to pay their fair share of taxes. Effectively that is a tax increase on the lower income portion of our population. Also, we can print money and Greece can't.. We call it quantitative easing when the Federal reserve prints money and buys Treasury debt. The money in your pocket is Federal Reserve notes. We are not close to being in the position of Greece, however if we do not change out income tax policy we will be there in short order. We can only print money for so long before the value evaporates.
A healthy, growing economy with low unemployment requires a progressive income tax system with a high marginal tax rate. The Greek people are protesting in the streets. We will not see an austerity program there. Here in the US Occupy marches in our streets. Occupy is still tame. If we do not change we will not be far behind Greece.
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