Taxes and welfare spending

“Greece’s last bailout expired on Tuesday and Greece missed a €1.6bn payment to the IMF.
The European Commission - one of the “troika” of creditors along with the IMF and the ECB - wanted Athens to raise taxes and slash welfare spending to meet its debt obligations.
Greece’s Syriza-led left-wing government, which was elected in January on an anti-austerity platform, said creditors had tried to use fear to put pressure on Greeks.”

I wonder how raising taxes and slashing welfare spending could contribute to the recovery of the economy. In addition to this, does Greece have a lot of rich people who evade taxes? Is welfare spending in Greece too much compared with the other EU countries?

It’s not so much that wealthy people are evading taxes, which is illegal, although that is happening too.

Most well-to-do, hard-working people honestly pay their fair share in taxes. The real problem is that a large number of very, very rich multi-national, multi-billion dollar corporations, including large banks, have the ability to spend millions of dollars each year getting corrupt legislators elected and more specifically, sending lobbyists to the legislatures to get tax laws passed which allow the corporations to make countless legal deductions from their taxes, thereby legally avoiding paying hundreds of millions, if not billions of dollars in taxes, and in some cases even getting hundreds of millions, if not billions of dollars in tax rebates. Meanwhile these large corporations can afford to have their voices heard in the government and in the media, complaining that they are paying higher “tax rates” than most individuals, which is intentionally deceptive because those voices fail to mention the tax rate corporations actually pay after all of the countless deductions; an “effective” tax rate which is much, much lower than the rate individuals pay, and in many cases zero or very nearly zero; or even less than zero, when you consider tax rebates. When an individual gets a tax refund, that is money that the individual already paid to the government in the previous year; when a corporation gets a tax rebate, that is the result of tax credits that the corporation has been given by the government when the numerous allowable deductions drop the corporation’s effective taxes below zero. This is the primary driver of debt not only in Greece but in nearly every government in the entire world. This is how most of the world’s money is going to the richest of the rich people in the world, while governments are going into massive debt. It’s all in the tax code. It’s enshrined in law because the entire system is corrupt. The individual, including the well-to-do, hard-working business owner, doctor or other professional who pays a great deal in taxes, has no power over such a corrupt system.

Obviously this system is not working out too well for Greece, whose GDP and debt is about one-sixtieth that of the United States. Greece could address the debt by repealing all corporate tax deductions and having corporations pay the actual tax rate of 26 percent. Or more simply, by raising the corporate tax rate by 10 or 20 percent or more. But the government is incapable of doing this because, just like nearly every other government in the world, the government of Greece is effectively controlled by the corporations. So instead, the government goes hand in hand with the corporations, pretending that the primary culprit is government spending and individuals who are evading taxes or are otherwise not paying enough taxes.

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