You seem to be saying that because the EU does not tax eg Greece, then when Greek incomes fall they do not pay less tax to the EU.
I am not sure where this is getting us. In your example there is a modest redistribution of funds into a locally affected region, but this is still small compared to the loss.
This still does not address the issue of ancient Rome.
I'm no economics expert, but I'll give it a shot.
The real issue that the specific illustration was trying to address is what do you do when you have an imbalance in payments but a single currency? That is to say, Spain, Italy, and Greece live beyond their means, and thus borrow about 800B euro per year, while the Netherlands, Germany, and France save about 2B euro. Yet all have the same currency, so how to create one fiscal policy for all? Most believe you cannot.
What the illustration, which was actually from Sachs and Martin, was attempting to illustrate is that in the US Federal system, where revenue is shared among 9 regions (and the Fed) that respond differently to economic conditions, the ability to re-balance a state, or regions books can go both ways, which is Keynesianism to it's core, but instead of being public/private transfers, it's public/public. So, if income falls in California, the Fed can and does print money, which they can redistribute (stimulus), or lend from the Treasury, via Congress, back to CA to mitigate the decline in tax rolls locally. In CA's case, they have been a long term net donor to the US Treasury, so pay back is actually owed. Obviously this system can be and is abused, but that's another story.
Since the EU has no, or a very small Federal system, yet, there is little revenue sharing (taxation), since it is in fact not one country. Thus, when one region (Greece) is short of funds, there is no mechanism to transfer, or loan them the money to cover the shortfall (other than short term), because they never put anything into the public till in the first place, and neither has any of the more flush countries. So, a decline in Greek national income, was offset by increased national borrowing (from an already high level), which rapidly required higher interest rates, and expensive default swaps, because lenders want greater returns for high levels of debt. The option to cut Greek public spending during a time of falling income, becomes politically unpalatable, and the old debt has to be refinanced now.
If, in order to prevent a run on the euro, the EU ends up backing Greek bonds, as has been suggested over the last two days, then in effect you have an
additional wealth transfer from Germany to Greece, as Greece has not been paying it's way for more than a decade, but has used the power of the euro to elevate it's living standard by at least 30%. Maybe the payback never becomes an issue, but the bond guarantee, or even a transfer of capital via Greece's private banks, raises the question of who will pay back the money, if Greece defaults? Will it be the Germans or the Greeks? What was the collateral; Greek national bonds? If it's the Germans, what happens if Spain, etc. need some help as well? Without a built-in system of re-balancing regional payments, all solutions are cobbled together under duress, and each last minute guarantee pushes the EU further down a political path of Federalism, which seems to be the ultimate outcome by design (and which is probably the only way to preserve the currency), but seems not yet fully appreciated by those who still enjoy their sovereignty, and non-Federalist rates of taxation.
As to ancient Rome, they did have the power to levy taxes, and did: 1% on farmland, which increased to 3% during times of war. They also had the cruder system of Empire, which both the UK, and the US have borrowed a few pages from, which is that if you need more money to feed the public and private purse, you go out and raid, or convince (sometimes at the point of sword) the other party/country to give/trade with you, so you can become rich again. The Romans did this so well that they were able to shift their entire tax burden to the provinces, especially Spain with it's silver and gold mines. Not only were they clever enough to do this, but they also put the tax "farming" process (as they called it), up for auction every year, as they taxed not according to individuals, but by communities. The did not care what amount the "tax farmers" (aka Publicani) collected, but only that they give unto Caesar what is Caesar's. After enough complaining by the provinces, a flat tax was eventually implemented by Augustinian, which, due to the cost of empire, ever increased, so much so that Roman farm land was taxed again, inflation increased, and the coinage debased. By the time of Diocletian, a price freeze was declared. The story goes on, but you can see the narrative is not much different than what we have today. Politicians, and the public will always debase a fiat currency because it allows you to have today, what you would otherwise have to go without, if you had to pay with hard currency.
