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The one problem Greece has that could be a problem here

For most Americans, Greece means great food, a once-in-a-lifetime vacation, and a never-ending financial mess that has very little to do with anything going on over here. While I’m always up for some Moussaka and a bottle of Retsina, and I still need to visit Athens, Santorini and maybe Mykonos, I take strong issue with the latter point—that what’s going over there has little to do with fortress America.
 
And no, the relevancy has nothing to do with perceived contagion, so let me get that off the table right away. Greece is tiny, so by itself can do absolutely nothing to Europe, never mind the global economy. The fear is that a crisis there will torpedo other vulnerable euro states, and/or lead to the disunion of the eurozone. Last time we were warned of the Domino Effect was Vietnam and we all know how that turned out (it didn’t.)

As for Greece leaving the European Union and destroying said entity I would submit that first we don’t know if Greece will stay or go and further we have no idea what that would do to the Union (could it make it stronger?) and if it weakened the eurozone or even lead to its collapse, how bad would the implications be? (I’ve heard radical fatalists suggest that if the eurozone wasn’t meant to be, it ultimately won’t, and so what?)        
 
My point is that this is all so much speculation. But there is a take-away from the Greek crisis that is much closer to home, which entails taxes, or more precisely what happens to a country when taxes stop being collected. I was speaking to a U.S. senator over the weekend who noted that at the very core of Greece’s problems was tax evasion, which is sometimes referred to as that nation’s “national sport.” He reminded me of the Athens swimming pool imbroglio of five years ago when Greek authorities discovered through aerial surveillance that there were 16,974 swimming pools in the wealthy suburbs of that city, as opposed to the 324 that were claimed. Various studies suggest that the Greek gray market (the untaxed economy) amounts to 25% of GDP or resulting in $20 billion to $30 billion in uncollected taxes, big money for a country that size. Greece has a large percentage of self-employed professionals, where non-reporting or under-reporting is rife. And Greeks hold tens of billions overseas in tax-free accounts.
 
So how does this relate to the U.S.? Well because our tax system is a mess and getting worse, a problem that Treasury Secretary Jack Lew acknowledged in a recent interview when he characterized the tax code as “broken,” saying it should be reformed. I’m not suggesting that the U.S. is about to turn into Greece, but the more we let corporations and wealthy individuals weasel out of paying taxes, the worse this problem becomes, because it encourages more aggressive avoidance and cheating -- and that hits our nation’s budget. Congress at this point hasn’t seen fit to fund the IRS properly, which is dangerous, according to Lew: “For every dollar that they don't have to enforce our tax laws, it means we collect less tax revenue. So it is something that is not fiscally conservative, and it's not a good thing in a tax system that is really based on voluntary compliance. There ought to be the sense that people who don't do the right thing will get caught.” Instead, enforcement apparently continues to flag. The New York Times is reporting that “hobbled regulators at the Internal Revenue Service appear certain to delay trying to curb widespread abuses at nonprofits until after the 2016 election.”
 
Just how big a problem is tax evasion in the U.S.? The numbers are murky, but one study suggests some $300 billion per year (compared to over $2 trillion in federal taxes collected) or 10 times Greece's missing tax revenue. But of course our economy is 69 times bigger than Greece’s economy, so you can see why this is a much bigger problem for the Greeks than it is for us. We’re a long way off from having tax evasion turn America into Greece—and better tax enforcement is hardly a winning campaign slogan—but why would we even want to get close to that point?
 
Lew says the IRS needs more funding. But more than that, Washington needs to enact bipartisan tax reform that broadens the base, eliminates many deductions and credits and lowers corporate rates. The question is: Will it ever happen?

Meanwhile, the Greeks and the Europeans can do the restructuring dance all they want, but if no one is paying taxes, the exercise is more moot than people realize. It’s also something we here in the U.S. need to watch.

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