Wolf Richter who runs the website Testosteronepit.com had a fascinating article about how the Italians are wealthier than the Germans.
A “Politically Explosive” Secret: Italians Are Over Twice As Wealthy As Germans
Germany’s federal government only had a minuscule deficit in 2012. But high taxes and the citizens’ greater willingness to pay them—though cheating is a national sport—have over the years extracted a lot of wealth from the people and transferred it to the government. In Italy, people have been more adept at hanging on to their wealth....
It could stir up a firestorm in Germany. It’s not just jealousy. Strung-out German taxpayers would have to be bamboozled into bailing out the mountain of Italian government debt that the Italians, whose median wealth is twice that of Germans, refused to pay for. It won’t sit well. Not at all.While it's true that the Germans have born the financial brunt when it comes to bailing their southern European EU neighbors, there's a much bigger question here. Why are the Italians financially better off than the Germans? Germany is indeed the powerhouse economy of Europe as well as one of its more financially solvent nations. Conversely, Italy and the Italian economy are boiling to death in its cauldron of unsustainable debt.
What is absolutely certain is that high tax nations tend to spawn underground economies, especially in bad economic times when the folks perceive that government no longer offers them any value. The proliferation of underground economies translates to cash and/or barter economies that are beyond the tax collectors reach. Folks who make the decision to just opt out of the system typically refuse to pay taxes to thieving governments and they also tend to opt out of the traceable electronic banking system.
While the growth of underground economic activity does vary from nation to nation and region to region, they are getting noticed. ChiefExecutive.net wrote about the rise of the underground economy in high tax California and also discussed other underground economies.
What California’s Growing Underground Economy Says About Sacramento
The underground or “black economy” generally refers to transactions that go unreported to evade taxation. Most people associate this with the illegal drug or sex industries but when government policies seek to reach further into private activities it often has the effect of driving activities that are normally above ground such as repair, services, and construction into cash or barter transactions.It's been reported that that up to 50% of all Greek economic output is underground and the Italian underground economy is 2nd only to Greece, all of which means that the Italian underground economy is substantial and probably growing.
Countries such as the U.S., Switzerland and Japan historically have had relatively small, nonreporting and/or illegal sectors, a typical estimate falling between 8 percent and 13 percent of GDP. Most European countries with higher taxes and regulation report underground economies of at least 20 percent of GDP with countries such as Italy and Greece having at least 30 percent of all economic activity going unreported.
Economic studies have shown that when people believe the taxes they are required to pay are reasonable and the political leaders tend to spend their tax dollars wisely, tax compliance rises, and when the reverse is true more economic activity is driven underground. California is showing signs that it is beginning to share one more characteristic with countries such as Greece and Italy: Its black economy is on the rise.
Last December, the LA Times reported that Sacramento officials are increasingly agitated by employers who pay their workers cash under the table to avoid payroll taxes, workers’ compensation insurance and other government mandates. This is in addition to smuggled cigarettes and counterfeit apparel. Officials believe that these underground activities are costing California about $7 billion annually in lost tax revenue.
If the Italians are wealthier than the Germans, it's because they are keep their money earned in the underground economy. The underground economy is a very good thing because it represents a phenomena that is literally terrorizing big spending governments by depriving them of revenues and the power to plunder. USA Today has reported on the underground economy.
Tax evaders in Greece, Spain and Italy better beware
In Greece, tax officials fly helicopters over residential areas to spot swimming pools of the alleged poor. In Italy, inspectors raid elite ski resorts to catch the down-and-out in their Ferraris. In Spain, taxmen snoop about homes rented to sun-seeking vacationers — then visit the owners who neglected to report the income.Governments are so desperate for money because they've over-spent, over-taxed and over-borrowed that they are attempting to frame the crisis in the context of class warfare since they no longer have the cash, tax revenues or debt proceeds to fund entitlements that were never affordable anyway. That's precisely what the French socialists led by Francois Hollande did and they promptly raised taxes on the rich to 75%. Well, the rich as well as businesses started fleeing France in droves, a situation that only made the dire economic situation even worse.
Evading taxes is almost a national pastime in European nations such as Greece, Spain and Italy, and for years their governments largely looked the other way.....
Greece, Spain, Italy, Portugal and other countries are raising taxes and clamping down on those who have found creative ways not to pay them. Many people admit they cheat, but the wealthy say they are being unfairly singled out to cover for government overspending — and people in the middle class, who have seen their household incomes crumble, are bitter about losing even more to taxes.
The delusion that taxing the rich will solve all problems is just that - a delusion. The famous French actor Gérard Depardieu who moved to tax friendlier Belgium was already paying 85% of everything he earned to the French government and that was before the Hollande 75% tax increase, here.
“I was born in 1948,” he wrote, “I started working aged 14, as a printer, as a warehouseman, then as an actor, and I’ve always paid my taxes.” Over 45 years, Depardieu said, he had paid 145 million euros in tax, and to this day employs 80 people. Last year he paid taxes amounting to 85 per cent of his income. “I am neither worthy of pity nor admirable, but I shall not be called 'pathetic’,” he concluded, saying that he was sending back his French passport.
Working informally, he pockets about 2,000 euros a month. His wife, a domestic helper, also works unofficially, earning 400 euros a month when she isn't busy taking care of their four- and six-year old children.When taxation becomes so punitive that working class folks don't have enough left over to eat and provide necessities for their families after paying their taxes, there is zero incentive to continue to participate in the system of systematic plunder. The rich who who are plundered at the rate that French actor Depardieu was plundered by the French government (85%) have the resources to pack up and move to tax friendlier abodes.
Sitting across from him at the cafe, his friend Marco flashes a conspiratorial smile when asked which side of the law he falls on.
He did want to be on the right side, he says with a sigh, but realised the economics were against him.
Governments do indeed understand capital flight and the underground economy, and they are prepared to declare war on ordinary folks who are just trying to make it in a world gone mad because survival in the NWO is verboten without government permission. What is the government's weapon? CASH - governments are restricting the use of cash with the goal of creating a 100% cashless, traceable and electronic fiat currency system.
The International War on Cash
The relentless war against cash payments waged by governments worldwide has perhaps gone furthest in Scandinavia. The ostensible reason given by our rulers for suppressing cash is to keep society safe from terrorists, tax evaders, money launderers, drug cartels and sundry other villains, real or imagined. But the actual aim of the recent flood of laws rendering cash transactions less convenient or limiting or even prohibiting them is to force the public at large to make payments through the financial system in order to prop up the unstable fractional-reserve banks and, more importantly, to expand the ability of governments to spy on and keep track of their citizens’ most private financial dealings.Many nations have already passed laws that severely restrict cash transactions and the ultimate goal is clear - abolish cash as legal tender. However, most nations still have legal tender laws so at best all governments can do presently is to restrict the use of cash in certainly transactions.
There can be no question that cash is king in the underground economy and, quite frankly, it's the only method of survival for the multitudes caught up in a nasty economy with nowhere to go.
It's probably also true that the underground economy is the only free market economy left on the planet. As underground free market economies based on voluntarism proliferate they will indeed start to replace the statist planned economy in a most significant way. Governments and bureaucrats determined to maintain their power and control will resort to anything, including murder and military dictatorship, to keep folks from engaging in voluntary commerce.