Music to read by:
Well good men through the ages, they try to find some sun...
But I caught up in the fable, we watched the tower grow
Well five year plans and new deals, wrapped in golden chains
But still I wonder, yeah I wonder, who'll stop the rain
Heard the singers singin', and how we cheered for more
The crowd had rushed together, just tryin' to keep warm
But still the rain keeps fallin', fallin' through the years
And I wonder, yeah I wonder, who'll stop the rain
But I caught up in the fable, we watched the tower grow
Well five year plans and new deals, wrapped in golden chains
But still I wonder, yeah I wonder, who'll stop the rain
Heard the singers singin', and how we cheered for more
The crowd had rushed together, just tryin' to keep warm
But still the rain keeps fallin', fallin' through the years
And I wonder, yeah I wonder, who'll stop the rain
“I tell him, ‘Baby, my cash money.'"
- Dania Suarez to a former Secret Service Agent
Taxes, Real Cash Money, and Corruption in Italy
We’re in Italy, where the new
government — headed by the distinguished economist Mario Monti — has
three big initiatives: make it easier to fire workers, raise taxes on
everyone, and limit the amount of money that can be paid in cash.
The first one was demolished by trade union opposition, and to tell
you the truth it wasn’t much of an initiative in the first place, since
even “legal” firings would have required the employer to pay a chunky
severance, running up to two years’ full salary. I found myself
wondering if I could get myself fired on that basis. Anyway, it’s
dead. Some variation may resurface in a while, but for the moment, it’s
dead.
Raising taxes (which goes hand in hand with cuts in some government
spending), on the other hand, is seemingly very popular. Maybe it’s a
Catholic thing (we’ve sinned, and now we have to pay for it), but I
rather suspect it’s a conditioned reflex from the old days. In those
happier times, nobody ever protested higher taxes, because they had no
intention of paying them anyway. So their attitude was “look at that!
Another tax to evade, another deal to make with the tax collectors.”
Back when I was reporting from Rome for The New Republic, I
once calculated that the marginal tax rate was over 120%. I went on to
describe a few of the myriad stratagems the Italians had devised to beat
the system (triple and quadruple sets of books, elaborate overcharges
to cover currency export, and lots of cash moving around, just to take
three examples).
The turning point in the retail world came with the arrival of
computers and credit cards. Once sales were entered in the computers
(yours or Visa’s, it was all the same), the merchants were screwed,
because there was no avoiding the taxes, especially the VAT. You had to
take a real risk, doing deals in cash and not ringing them up at all.
Sometimes you got caught (the tax men sometimes paid rewards for
informers).
"It's raining, the government's a thief. The folk wisdom had it right: the government was trying to steal the people's money, and so unpleasant things happened."
Ditto for the big businesses, who got nailed by bank reporting. In
the old days, there were banks (famously in Switzerland and the Channel
Islands and the Caymans) that wouldn’t tell anyone, even a government
official, what you were worth. But that slowly changed, and now that
the horribly truthful numbers are flushed out of the computers every
evening, it’s hard to beat the system.
But there’s always a way, and the easiest way is to use real cash
money instead of American Express. That puts you outside the tax man’s
little black box, and of course everybody knows it (because everybody
who can manage it, does it). So the Monti government is banning all
cash transactions over a thousand euros. Over in Spain, where
“austerity” is also the word of the day, the government wants to cap
cash transactions at 2500 euros (the official exchange rate is something
a bit north of $1.30 per euro. Yeah, it’s expensive over here). Both
Latin countries are acting on the assumption that their citizens are
trying to cheat their governments.
That is, the governments assume that the people — virtually all the
people — are corrupt. Which brings us to the sermon of the day.
In the old days, whenever it rained, the people would say “Piove.
Governo ladro.” It’s raining, the government’s a thief. The folk
wisdom had it right: the government was trying to steal the people’s
money, and so unpleasant things happened. When the state’s greed
becomes excessive, the people will always find ways to steal their money
back. And there’s always a way. Down at our level, for example, you
can buy a 2,000 euro item with cash by paying smaller amounts several
times. Otherwise you have to pay taxes, and the seller has to pay
taxes, all of which are relentlessly rising, and if you don’t beat the
system, you’re going under.
You’d think that a government would know that. But they think they
can catch the petty thieves by tracking cash withdrawals from the
banks. I saw a video online recently where reporters went around
interviewing “normal” citizens, asking how much cash they needed per
week, and the answers were quite low. This sort of thing lays the
groundwork for the scandal industry — very highly developed here — and
you can imagine the headlines: “movie starlet withdraws ten thousand
euros in a single day!” — and so forth.
Sooner rather than later, a black economy will arise, just as it did
when Italy’s labor costs went through the roof. The labor costs were
defeated when manufacturers ran two or three shifts per day. They paid
the extravagant social security, health care, and pension taxes for the
first “official” shift, and the other(s) shift(s) was off-the-books.
Similar systems will be worked out for transactions over a thousand
euros.
Don’t ask me for details. I’m looking for consulting work…but trust me, the black economy is a sure bet.
The fascinating thing to me is that the anti-cash,
everybody’s-stealing crowd doesn’t say much of anything about raising
taxes in the middle of a recession, which I always thought was a
violation of some basic economic principle. You just don’t hear that.
When I ask about it, they usually shrug their shoulders. Why? Because
they’re too busy figuring out how to beat the system.
If they read their own headlines, they’d see that there are lots of
bigtime thieves on the other side. In the health care system, for
example. Some of the best clinics in the country have been found to be
making illegal payoffs to doctors, administrators, and government
regulators. Some of those clinics had turned into the special domains
of trade unions, or political parties. Kinda like some stories back
home about our regulators living it up in Las Vegas at our expense.
I don’t see any happy ending to all this. But it confirms one of my
basic convictions: when the state steals from the people, it turns the
people into thieves.
Or the people revolt. But that’s a rarity, and quite un-European.
Yes, they had the French Revolution. But it failed. And there were
some aftershocks in the 19th century, most all of which failed too.
Ours is the only durable and successful revolution. Another reason why
our elections are so important. If we can stop the mad stampede toward
Tocqueville’s nightmare of American tyranny-by-small-steps, and roll
back at least a good part of the recent expansion of state power, we may
yet give the world a reminder about what works and what doesn’t.
If you care about freedom, that is. Otherwise, just use the
computers and the “social media” to watch everybody’s every step, and
watch how fast “freedom” becomes a synonym for “what the state wants.”
Related Reading:
Fascism Returns to Italy
What comes after Europe?
Voting For Yesterday In France
Europe, 2012
Ãœber Alles After All
Bambino, My Cash Money!
The Non-Existent Stairway To Socialist Heaven In Sweden
Europe's Demographic Deficit Grows Wider By The Day
The callous cruelty of the EU is destroying Greece, a once-proud country
What comes after Europe?
Voting For Yesterday In France
Europe, 2012
Ãœber Alles After All
Bambino, My Cash Money!
The Non-Existent Stairway To Socialist Heaven In Sweden
Europe's Demographic Deficit Grows Wider By The Day
The callous cruelty of the EU is destroying Greece, a once-proud country
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