After years of watching center-left and center-right governments try making government less costly without making it smaller (what I have called Fauxsterity), Greek voters decided enough is enough and voted for SYRIZA who promised something different. Granted, it was a hard-left version of something different, but it was still supposed to be different. No longer would “reform” in Greece mean the people get smacked while government remained colossal.
Well, after nearly pushing the limits – and considering real change (leaving the eurozone) – SYRIZA blinked, and proposed a slew of tax increases that amount to over 2.75% of GDP (Telegraph, scroll down to 18.25 and subtract the defense cuts from the 2016 total). That would be the economic equivalent (% of GDP) of over $450 billion annually in US sales, income, and payroll tax hikes.
It is a massive tax increase, and it will be as successful as all the previous tax increases (i.e., it will be wildly off target for revenues; it will impact the economy far worse than predicted; and it will force everyone back to the do-or-die negotiating table in a few years, at most).
Once again, the EU and the IMF would have us believe that raising taxes and keeping government growing is “reform.” It is in fact the exact opposite of reform, and like the previous opposites-of-reform-disguised-as-reforms, it will fail.
How many more times will nations try and fail to tax themselves into prosperity before they realize it doesn’t work? How much more suffering do the peoples of the world have to take?
UPDATE: Amazingly, the Impossible MotherF – ahem – the International Monetary Fund has told Greece to raise value-added taxes even higher, and reduce the corporate tax hike by a third. Not even Mitt Romney was this politically tone-deaf.
Meanwhile, said IMF has used Track Changes to present their counter-proposal (essentially turning the Greek government into an embarrassed underling), and SYRIZA’s coalition partner has dropped a Nazi metaphor…all in the Telegraph today.
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