Yves here. There’s a very good discussion in comments at New Economic Perspectives on how to add to or improve upon some of Wray’s “tax bads” ideas. One issue that some readers are are likely to find bothersome is that sin taxes are regressive, as in they hit low income people harder than the affluent. Remember that this discussion covers only taxes, not spending, and MMT advocates favor strong social safety nets and much higher funding of programs that promote social mobility like health care and public education.
By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. Originally published at New Economic Perspectives
This is another instalment in the series on the MMT view of taxes. I’m back from China, participating in the annual Hyman P. Minsky Summer Seminar at the Levy Economics Institute. Yesterday my colleague, Mat Forstater, gave a talk on the job guarantee and “green jobs”. Along the way he made two particularly insightful comments on MMT and taxes that I’ll use to introduce this instalment.
First, he discussed the MMT view of “modern money”—that is to say, the money that has existed “for the past 4000 years, at least, as Keynes put it in his Treatise on Money. The money of account is chosen by the sovereign and used to denominate debts, prices, and other nominal values. It is the Dollar in the US.
It is like the inch, the pound, the meter, the kilogram, the acre or the hectare—a unit of measure.
Mat put it this way: the sovereign can no more run out of “money” than it can run out of “acres” or “inches” or “pounds”. We can run out of land, but we cannot run out of acres. We can run out of trees but we cannot run out of the linear feet we use to measure them.
You cannot run out of a unit of measure!
The “dollar” is the measuring unit in which we keep our monetary records. We cannot run out.
Second, and more relevantly for our story today, Mat said that a guiding principle for choosing what to tax should be “tax bads, not goods”.
We’ve previously established that “taxes drive money”. We’ve also established that from the perspective of the sovereign that creates the money, the purpose of the monetary system is to move resources to the public sector.
Clearly we do not want to move all resources to the public sector; we want to leave some for the “private purpose”. Further, we want some “efficiency” (I’ll leave the definition of that vague for now) in this process, in the sense that while we want to move some resources to the public sector we do not want to discourage useful private sector activity.
It would be even better if this process of taxing to move resources to the public purpose actually encouraged more activity that was beneficial for pursuit of both public and private purposes.
So we need to think about what kind of tax can “drive” a currency, without diminishing private initiative.
For example: what if we taxed paid work at a rate of 15% in an effort to “drive the currency”?
Let us begin with a nonmonetized economy (say, Tribal or Feudal). The newly formed sovereign state wants to move resources to itself by imposing a wage tax of 15%, spending its dollar-denominated currency to hire labor.
From inception of our monetary system, we could not “drive” the currency because no one would work for pay. The Tribal or Feudal society members would go about their activities raising their crops and hunting their deer, with the shares of output distributed as prescribed by custom.
No one would need to work for money wages, so they could refuse the offer of currency for work. And they could avoid the tax by refusing the paid work. The optimal strategy is to avoid monetization.
The new state would offer its currency, and find no takers. It would have to resort to obvious force—send in the troops—to get resources for the public purpose.
A tax on monetary income will not “drive” a currency unless the economy is already monetized.
This is precisely what the European colonial powers found when they tried to monetize Africa.
You need a reasonably broad-based tax that is hard to avoid. It is easy to avoid a tax on money income if people can live without money income.
So what the colonizers did was to impose either a head or hut tax. Everyone has a head and a hut. From inception, that kind of tax works well to drive a currency.
(Critics please note: I am in no way advocating colonization of Africa or anywhere else. This is an historic example used to make a point. Oh, I know the trolls are going to accuse me anyway.)
Now, once you’ve monetized an economy such that a large portion of the members must work for money incomes in order to buy the necessities of life that are largely available only for monetary purchase, then you can move to other kinds of taxes.
It is very common to use wage taxes, sales taxes, profits taxes, income taxes, and wealth taxes in highly monetized economies. These will “work” once you’ve monetized the economy, although they would not “work” in an economy that was not yet monetized.
Still, are they the best way to drive the currency?
Supply Siders like George Gilder and Art Laffer had a point during the era of Reaganomics when they argued that these sorts of taxes introduce a “wedge” that discourages work effort (or sales effort). If we tax wage income at a 15% rate (think FICA tax in the US), then “on the margin” we’ve made “wage slavery” less remunerating than leisure.
(Note that the wage tax is particularly pernicious because only human labor gets taxed, while the robots get off scott-free.)
I think the Reaganites grossly overstated the effect, but beyond some point it does seem reasonable to argue that a tax on wages and other nominal income will reduce the “work effort”. In my own case, I have on occasion turned down extra paid work because the 50% or higher marginal tax rate (including all federal, state, social security, and city taxes) made leisure much more appealing.
“Work effort” from the social perspective is not normally a “bad”. Through work we can serve both the public interest and the private interest.
(Yes, people can and sometimes do work too much. But this is a problem that can be better treated in other ways. For example, requiring employers to pay time-and-a-half or double-time wages is a good way to discourage excessive—involuntary–overtime work.)
Apparently, the favorite tax among progressives is the corporate income tax. I read virtually every day another call to raise the corporate tax rate.
Given all the attention it gets, this topic deserves a separate treatment, so I’ll save that for another instalment. Meantime think about this: are corporate profits an “evil” that we want to banish? This is not obvious to me.
So. Tax bads, not goods.
We’ve long taxed various sins. While some confuse the purpose of sin taxes, it should be clear that the purpose of taxing bads is not to “raise revenue” but to “reduce sin”. We want to reduce the sin of smoking. Of polluting. Of high-speed trading.
I’m always surprised when my progressive friends see the “Tobin Tax” (financial transactions tax) as a potentially great source of tax revenue to “pay for” all the goodies they’d like government to provide.
No, the purpose of a Tobin Tax is to reduce turnover and it would have achieved complete success in eliminating the sin of high speed turnover if it raised no revenue at all. Ditto the cigarette tax. Ditto the carbon tax.
Admittedly, perfection is very hard to achieve—we’ve still got smokers and we’ll still have carbon polluters for a very long time.
Can we think of a tax on bads that can also “drive” a currency?
Clearly if a cigarette tax was nearly successful, reducing smoking to just a handful of addicted abusers, it would not be a very good “driver” of the currency. Only the addicts would need the currency to pay the tax, and while a few of us nonsmokers would still want to get the currency (knowing we can induce the addicts to work for us to get their means of tax settlement), most people would have no need for the currency.
But what about the “hut tax”? Almost all of us need our “hut” to live in. It is an exceedingly broad-based tax. It would drive the currency.
Where’s the “sin” in hut-living? The environmental “foot print”—the land that is cleared, the construction materials, the furnishings, and—most relevantly—the energy used to heat and cool our hut.
For that reason, a “square-foot-of-living-space” tax on huts would base the “sin tax” on a pretty good proxy for the “sin” of hut-living.
Note we’ve already got property taxes, but these are generally based on nominal value of the property. That might be a proxy for environmental “sins”, but not necessarily a good proxy. A tiny flat in Manhattan will have a nominal property value greater than a 10,000 square foot spread in the wilds of Montana.
Of course, the nominal property value tax also hits a proxy for “ability to pay”—it is a somewhat progressive tax because higher income people live in more valuable property. Thus, the property tax also assesses the sin of excessive riches.
However, the “square-foot-of-living-space” tax on huts will also tax the sinfulness of high wealth and income, since richer people tend to have bigger spreads. It is perhaps as good as the nominal property tax in taxing the sin of wealth. Worth considering, anyway.
I have long advocated a more progressive hut tax: a “cubic-foot-of-living-space” tax. It will also tax the sinfulness of environmental impact (since there is a bigger volume to heat and cool). And from casual observation, what I’ve noticed is that rich folks like really high ceilings—30 foot high in the case of entry ways.
The cubic foot tax would be highly progressive—that 10,000 square foot spread becomes 150,000 cubic feet if it has high ceilings. There’d be a strong disincentive to building the monstrosities.
We can tinker with the tax, encouraging more outdoor living if that seems to be in the public interest—more open porches equipped with rocking chairs. Or giving a break for enclosed space that is not air-conditioned.
To reward energy efficiency, there should be adjustments for going solar, wind-driven, and geothermal.
We probably also need to think about different tax rates for different parts of the country. If we want people to live in—say—Chicago, we might want to provide a lower tax rate there than in San Diego or other places with moderate climates. It depends on how environmental we want to go—I’m not sure we should have humans living in places where humans probably should not be living, but that is a matter for public discussion. We can have a higher rate in Chicago to encourage smaller spaces that need to be heated in winter and cooled in summer–but I suppose it’s already hard enough to get people to live in the cold/hot places as it is.
Note that the sin tax on huts will reduce the sin of living in high cubic foot dwellings, but it does not suffer from the eventual elimination of tax receipts that a cigarette or financial turn-over tax will face.
We can live in smaller dwellings but as long as humans have more than a virtual existence, we’ve got to live somewhere.
It is, thus, a tax that will continue to “drive” the currency. I’m not saying that we should move to a “single tax”, but Henry George was sort of headed in the right direction. Once we understand what taxes are “for”, we can start to think about what kinds of taxes make sense.
More next time.
Is this back to the window tax?:
Hah, good for you! Lambert thought of that as well. I was remiss in not mentioning it.
No Lex, that just discourages windows which are not as necessary as a roof over your head.
France recently put in a hefty sin tax on beer — 160%. According to Hollande the money was needed for social programs. As expected, beer consumption plummeted (a good thing?) so tax revenues never materialized. What Hollande did not talk about he was protecting French wine production behind the scenes. You see, he did not introduce a tax on wine, just beer. It just so happens most beer France consumes is imported from Belgium. Belgium is a tiny country so it was easy for Hollande to do what he did. Belgium challenged France’s unfair beer tax at the EU High Court and lost, well, because France usually gets it way.
Sin taxes can do good, like reducing smoking, but in some cases it can be used as an economic weapon against those without the means to fight.
Interesting article, with an important insight that actually poses a challenge for a key part of the MMT Weltanschauung.
Wray writes that “taxes drive money” and that the purpose of the monetary system is to move resources to the public sector.
This line of reasoning, however, leads necessarily to the following conclusion: taxes do “fund” the public sector, in the normal meaning of the word.
Perhaps the author would like to comment this point in the next article of this series on the MMT view of taxes.
According to MMT, the government doesn’t need its citizens’ money. What the government needs is their work (and other non-monetary resources), and that’s where taxes come in. I don’t see any inconsistency here.
So you are saying that Wray actually meant to say: “Taxes drive people to work,” but didn’t have the nerve to actually say it.
People pay taxes in money (dollars, in the USA), government then spends those dollars back into the economy.
(If government stopped collecting taxes and kept spending as before runaway inflation would ensue).
Thus taxes “fund” government spending – in the everyday meaning of the word..
No, MMTers don’t think ‘government then spends those dollars back into the economy’. Dollars are destroyed and others dollars are created, it’s not about ‘spending back’.
If taxes are used to prevent inflation and not to get dollars from the private sector, then taxes don’t ‘fund’ anything. You cannot invent your own terminology and your own definitions.
Taxed dollars are not destroyed. They are deposited into the Treasury’s account at the Federal Reserve. As of June 11th, the Treasury’s account had a balance of $46.921 billion, up $13.026 billion from June 4th (thanks largely to estimated tax payments).
Every one of these dollars will be re-spent, precisely as Jose said.
Well of course. It is called ‘accounting’.
What Wray and others say is that the government doesn’t have to ‘find’ a dollar before spending it. If it does so, it’s because that’s how it has chosen to function. I don’t agree completely here (see Geoffrey Ingham), but in a technical sense, the government doesn’t need to hoard money to be able to spend it later.
No, the dollars in yoir account are destroyed. New dollars that did not previously exist are credited to the government’s account. It is not possible to pick up the magnetic image on a hard drive, stuff it in a wire and transport it to another computer. What ends up in the government account is a re-creation, not what you had in checking.
“New dollars that did not previously exist are credited to the government’s account.”
Tax dollars are destroyed and new dollars created. Net = zero?
I hope not, but it seems this is another ‘not the nerve to actually say it – by it, I mean, on the whole, there is no (net) destruction of money (tax dollars), no????
@Ben No, the dollars in yoir account are destroyed. New dollars that did not previously exist are credited to the government’s account.
Your bank’s debt to you is cancelled in the amount of the tax check, and a corresponding portion of your bank’s Reserve Bank balances are reapportioned to the Treasury General Account. Leaving Reserve Bank liabilities unchanged, fees excepted. Leaving your bank even. Leaving you that much poorer and the government that much more flush. It’s just like writing a check to the dentist, except that your dentist doesn’t have an account at FRB; her bank does, and thus she requires that intermediary.
Now “Reserves” are certainly drawn down; that’s because the TGA isn’t a reserve account; it’s a demand deposit account. USG uses the TGA for daily checkwriting and electronic transfers, not mere nightly net inter-account clearances, as with Reserves. Because of the brief diminishment of Reserves associated with high TGA balances and the attendant reduction in bank liquidity, USG maintains TT&L accounts at commercial banks. Leaving aggregate Reserve balances and aggregate deposit balances both unchanged, post taxation. A matter you conceded, here, and then attempted to explain away after I’d schooled you on it:
Your “magnetic image on a hard drive” point concerns the physical representation of the liability. By that trivial measure, a bank’s act of returning reserve notes to the FRB for reserve balance credit destroys those paper dollar balances and creates new electronic balances. The liability is reapportioned; it changes record-keeping form; the notes are vaulted and considered neither asset nor liability until circulated, while the bank’s reserve balances are augmented.
That’s certainly not what Dr. Kelton means when she says taxes destroy money; she argues, proposterously, that no assets are conveyed to the government in the act of taxation.
MMT maintains that the Federal Reserve marks up balances for government in a substantially different way from other account holders. It’s not making an argument around the mere physical representation of the asset or debt; this can change as well for any other reserve bank customer.
Econ, you’ve spent how many words here arguing against no one but yourself? I am at the point of suspecting you really do exist in an alternate reality.
If taxes are used to prevent inflation…. speaking of inflation, Mitt Romney just held a big conference with the republican leadership and he did some mittspeak afterwards to the effect that we need to go to war asap (incoherent as usual) and that the world is awash in money, aka capital. If it were just money it would somewhat innocuous but since it is capital it rots if it sits idle and has nothing to profiteer on, like war. So there is an enormous currency inflation threat looming. If there is say 50 trillion in unused capital out there and it all tries to come home at once, in spite of the repatriation tax, there could be biblical “inflation.” And then what? Under MMT the extra, inflationary, money is removed from the system by taxation. But suddenly all bets are off because there is so much money! Crazy.
I’d like to propose a solution: send all the neocons and neoliberals and banksters and private equity hucksters with all their grift and graft stuffed in every pocket to Fukushima Daiichi. Pronto. Let them buy fancy hazmat suits and get to work. They can buy all the equipment they could possibly need, right?
Taxes drive people to accept the government’s money, yes, ie to work for the government. Is this something audacious to say?
By using taxes to force the people to accept “the” government’s money is a really, really bad idea. And it is one of the many things that are wrong with MMT theory. The basic idea of MMT, that sovereign nations have an unlimited supply of money, is an old idea and a good idea. I first heard it in the summer of 1949 when it was described as “Rocky Mountains made of gold.” MMT supporters go astray because they lack the nerve to describe what a new national economic system would look like if we had an unlimited supply of money. Apparently they don’t know how to do it, or they are afraid that their academic standing would be damaged. I suppose it is natural for one to want to protect one’s own supply of money.
But taxation is a really, really bad idea. It requires a huge bureaucracy which is resented by those who are taxed, and which is subject to manipulation and gross unfairness. This is so obvious that it is shocking to see that MMT theorists so strongly advocate for it. Furthermore there are other ways to make our currency the one that our citizenry would accept. These other methods would be pleasing to the people.
There are other such examples in the hodgepodge that is called MMT and it shows that the principal theorists either don’t know how to design an economic system or are not really serious about the theory that has become their principal means, weak as it is, of winning prestige in their profession.
I have advocated for better ways of implementing MMT at Wray’s home site, and I have been told that they (Wray) have no intention of changing anything. Apparently others before me have made many of the same points and nothing happened.
But an unlimited supply of money, as the heart of a new economic system, can transform our lives. Someone just needs to design it.
“So you are saying that Wray actually meant to say: “Taxes drive people to work,” but didn’t have the nerve to actually say it.”
As far as I know the MMT people have never been shy about saying this. Seems to me to be at the bottom of their obsession with the “job guarantee” as well.
If a monetary sovereign can have as much money as it wants, there is no reason why the people of the monetary sovereign, for the people and by the people, should not have as much money, individually, as each of them wants, in order to live a decent live…if Money is created via the people spending it into existence.
Paying taxes can, then, be thought of as ‘spending money’ into the Treasury to be held there to curb inflation.
Don’t encourage them. MMT is one big pile of chicken and egg jokes.
Which came first, money or capital?
Capital is a relation between humans that didn’t exist until long after money was invented.
Isn’t money a relation between humans that didn’t exist until long after humans were invented?
Wasn’t debt created before money? Or is David Graeber making it all up, too?
capital, but they didn’t de-structuralize it, divide it into tiny units and call it money until they realized they could. That was the conclusion we came to after blowing through $300,000 in grant money from the Foundation for Sedentary Social Research laying around drinking red wine and surfing Youtube. However, when we typed it up & put it in a report with a nice cover page and lots of commentary it looked like we’d done some real work. Fortunately.
Did I read this correctly? Is Professor Wray talking about colonizing Africa all over again? :-o Oh my Goodness Gracious. This time black people can do the colonizing and whitey can stay home and chill smoking dope and watching NASCAR. Why would anybody want to colonize anybody else? I never understood that, frankly. Maybe I’m weird. Or lazy. It sounds exhausting just thinking about it.
(sorry just kddng. I can’t help it. See line 41, then tax me for immaturity and stupidity. Or maybe levy a fine or a fee of some kind. At least it won’t be “a tax increase” haha.)
What about taxing people who talk on their cell phones on the bus? It’s not a big revenue generator, but I’d volunteer to collect the money. Just give me a badge and a gun. Sometimes you have to take a stand for something bigger than yourself.
You can’t run out of units to measure things, but what are the things you’re going to measure? And if they get so small you can’t see them anymore then it won’t matter how many you have . Why does that happen? Hmmmm.
I think of it like this.
You can’t run of feet trying to measure a baseball bat. But we don’t have a million foot baseball bat….in existence.
Similarly, you can’t run of dollars trying to measure the national GDP. But don’t have a million trillion dollar GDP today…unless you add a few zeroes to the dollar bill.
How useful is it to say we can’t run of dollars to measure the national GDP? I don’t know.
The MMT lunacy gets more and more convoluted and stunningly inane every day!
I thought it insane that MMT advocates could claim with a straight face that printing money could result in a concomitant increase in goods and services…
…Now the MMTers claim that it is possible to create more land simply by changing the definition of the dimensions of the measure of account: the acre !
Why not generate whole new worlds by changing the definition of the measure of account used to define the mass and volume of the planet??!
Voila! There are now thousands of Earths to build utopias upon with printed/counterfeited currencies!
Yves, You should be ashamed of yourself for encouraging this madness.
Accounting is merely a contrivance -one that may or may not have any relationship to real things. Putting numbers onto a ledger does not change the amounts of real finite resources in existence.
Printing money does not create goods or services.
“…taxing the sin of wealth. ” -Randy Wray
Please define ‘wealth’ and explain why You believe it is a ‘sin’.
I am actually coming to believe that proponents of MMT that speak such venom and lunacy may be the most delusional and dangerous people running free and unfettered in Our Society today.
And when he was gone forth into the way, there came one running, and kneeled to him, and asked him, Good Master, what shall I do that I may inherit eternal life? And Jesus said unto him, Why callest thou me good? there is none good but one, that is, God.
Thou knowest the commandments, Do not commit adultery, Do not kill, Do not steal, Do not bear false witness, Defraud not, Honour thy father and mother. And he answered and said unto him, Master, all these have I observed from my youth. Then Jesus beholding him loved him, and said unto him, One thing thou lackest: go thy way, sell whatsoever thou hast, and give to the poor, and thou shalt have treasure in heaven: and come, take up the cross, and follow me.
And he was sad at that saying, and went away grieved: for he had great possessions.
And Jesus looked round about, and saith unto his disciples, How hardly shall they that have riches enter into the kingdom of God! 24 And the disciples were astonished at his words. But Jesus answereth again, and saith unto them, Children, how hard is it for them that trust in riches to enter into the kingdom of God! It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.
So that, along with another 2500 years of Western thought on the immorality of pursuing wealth.
Thou shalt NOT STEAL.
Thous shalt NOT COVET.
Lots of indigenous people would like to have a word with you and yours.
You cannot defend yourself with facts or reason so You resort to ad hom and slanderer. Beyond weak.
Attribute nothing to Me that You cannot back by evidence you damnable LIAR.
haha. actually, you may want to flame me with narrative napalm, since I do think there are circumstances in which it can work. So I joke and poke a little good natured fun but I respect the intellectual probing that MMTers do. I really do, all kidding aside. Professor Wray and the extremely hot Professor Kelton, how can somebody hot be an economist? That’s just too weird to think about and have it make any sense. Beside,, I like intellectual adventure. But not outside when it’s hot and humid.
The idea is the form and the energy. Money is energy but it isn’t form. When you measure you have to understand what youre measuring, is it form? or is it energy? Both have units and measures. Money is like electricity and the form itself is a wave. Why does the wave have it’s form? What makes and changes the form? If a wave form has potential energy but no energy, then money can animate it. If somehow the energy of money ALTERS the wave form function and the wave forms become disharmonious, then all hell can break loose. That won’t be anybody’s fault however since nobody could have seen it coming.
So, there has to be something material within that wave form, that the form causes to move together in a unitary way, for there to be energy? Then what is the energy? The moving of the material, the sea-water, which energy is then spent when the wave crushes me at Zuma Beach with its heavy shorebreak?
Only for the monetized portion of the transfer for resources from individuals to governments. Governments have used other means to transfer resources for government purposes (generally some sort of infrastructure or collective social service). At one time in parts of the US, roads were built by court order of a “road jury” that worked without compensation to jointly build a road that served all of the members of the road jury and provided connectivity for a wider population. Conscription for military service (by far the most common and most abused form of infrastructure) was compensated by grants of land (a sort of negative tax for governmental purposes).
What Wray soft-pedals is that the “sovereign” are those who exert a monopoly of force and compulsion; claims upon resources are based on the cultural understanding of how limited or unlimited sovereignty is in a society. One can argue that the political limits on the financial aspects of sovereignty in the US makes infrastructure impossible by military crowding out of revenues and denial of taxation and spending for civilian purposes as matter of political philosophy.
The sovereign can set the unit of measure but the sovereign cannot claim resources with the political power (including force) to do so. Taxes were a sorta social contract with the sovereign to avoid slavery and confiscation when sovereigns were absolute and those who paid the taxes were the first-order direct reports to the sovereign, who had the power to tax or collect taxes downward–or the power of confiscation or slavery.
The situation in the US is that those folks who normally would be dependent on the sovereign for protection now have reversed the power relation. The sovereign is dependent on them for financing their political survival directly, not through government institutions. They can completely avoid taxes.
Another factor to take into account is the drag on the economy caused by the complexity of tax rules and the cost of collecting taxes.
The French tax system is totally byzantine and hugely expensive for the tax payers and is thus bad ROI for society.
The educated who are able invest huge amounts of time to understand the system and to keep up with the changes that are machine-gunned out of parliament by trigger happy politicans, figure out how to reduce their taxes and, as a consequence, modify their economic behaviour in ways that are bizarre….
50% of the French tax bureacrats could be put out of their misery by basic simplification and could instead spend their time doing something truly useful.
A flat tax, with no déductions possible for individuals or corporations, is not fair but a lot is gained by the simplicity of the system and of its enforcement.
Wouldn’t that, a simple tax regime, severely limit the States abilities to drive social “goods?” As the mention of the French beer tax indicated, the “real” purpose of the tax was economic protectionisim. More jobs for French wine workers. In that narrow sense, the tax was legitimate, from the French perspective. This tax is directly driving the French economy. If the Belgians object, let them resort to Diplomacy, or enact their own anti French wine tax. As far as the French wine workers are concerned, complexity is a good thing.
As an aside, my Dad had to wrestle with an Ancient Lights issue when adding the master bedroom suite onto our old home on the Beach. These taxes may be old, but they still effect us.
Sure, taxation can be an effective tool to drive social goods. All taxation, including the good ones, benefits from not being amended by micro managing politicians, from being easy to understand, apply and enforce.
The French are doing pretty much everything wrong in this field, which means that taxes intended to do good become inefficient. In addition, the right hand does not have a clue what the left hand is doing, resulting in two different tax measures neutralising each other, however with the tax payers and the tax bureaucrats stuck in the middle, having to comply with new rules all the time.
The French wine lobby is very powerful. French are drinking less wine and more booze and beer. Wine is one of the few foodstuffs where producers are not obliged to indicate contents on the packaging. When I open a Château Margaux, I have no idea of the quantity of pesticides that I am getting.
It all comes down to politics, doesn’t it. As someone elsewhere remarked, economists can supply policy suggestions, or manufacture rationalizations for previously set policies.
I wasn’t aware of the wine makers exemption from contents labelling rules. I really am doing better with my litre of plonk, egad!
There are plenty of bio wines available in France and at least in Paris there are even wine bars serving them exclusively so anyone wishing to drink wine with no significant pesticide contamination has options. It’s true beer is now expensive in France, but doesn’t seem noticeably more so than for instance in Belgium or the Netherlands, two countries of beer drinkers although it is more than in wine drinking Italy.
Also most French proles now file taxes online with all the boxes pre filled in, so the entire filing process is relatively simple, even if the underlying code is not. Most of the byzantine complexity of tax codes is simply an unending historical accretion of cheats built in to benefit those who have the resources to game the political processes in their favor.
There is probably some rough number of words in a given code where the code becomes commonly incomprehensible–usefully incomprehensible to those with the resources to hire experts to untangle and game. Maybe we should consider putting a cap on the total number of words the tax codes can contain, so each new proposal to alter the code must be balanced with pruning the code elsewhere so this process of accretion to incomprehensibility cannot proceed.
Organic/Bio wines produced in France and Europe has to live up to standards as regards the production. But there is nothing on the lables of ordinary or organic wines stating anything about the contents.
Wines are a remarkable exception. Other foodstuffs have very, very detailed labelling.
Beer has traditionally been cheaper in France than in Belgium. I have been drinking cubic meters in both countries since the yearly 90s. France is becoming more expensive and less competitive every year.
While we cannot run out of units of measurement, which is a secondary symbol we can run out of area to be taxed as a unit of measurement… ie when all acres in France are taxed, what then?
Simple, keep the tax steady, and change the “size” of the acre.
The best example I can think of on short notice is the metrication of the English measure. Suddenly, beer drinkers were faced with paying the same price for a half litre as they would have previously paid for a pint. Beer, being sacred, (Dionysus being originally the god of beer, not wine) the backlash from the highly religious English public moved Parliament to codify that beer and cider would continue to be measured out in Imperial Pints. Social utility triumphs yet again.
Yes, corporate taxes are “bads”, as corporations today enjoy a separate status in society that affords them additional protections that many would never have extrapolated from earlier historical trends. But TPTB did a good job there.
This is why the economists can’t make the rules, but can provide models, like engineers. You need a qualified product development team focused on customer service (or, say, semi-functioning democracy) to make the rules.
First we have to establish what sort of society we want to live in and then tax “bads” rather than goods. Right now there is no general agreement on what the “good” life is other than “I want what I want and it’s all about me”, i.e., the culture of narcissism.
Now, most of us here would advocate a carbon tax. I would start up a taxing energy use, say gasoline, at $.10 a gallon this year and double it every year and cap it at $3.20 a gallon. This would give individuals and companies a chance to innovate and search for alternatives. I would also, out of the funds generated, give subsidies to green energy. I’m sure there are better schemes out there but the general design is clear. But, in the U.S. such a scheme is impossible because people base their lives around cars (almost literally) and paying more to fuel cars and trucks is something that people don’t want. We have to understand that in the U.S. concerns for the environment are not very important–and why should they be since the cultural values are, overwhelmingly, centered in private life (I, me, mine). Even if those concerns were to change the relentless power of the energy companies and their tight alliance with the national security state make a serious approach to environmental actions moot.
We can start with cultural change–if we can get cultural leaders to advocate for a more sane and convivial society then there is a chance to move on. So far, this isn’t even close to happening.
Tobin tax is similar to carbon. Most Americans distrust the vultures and hyenas of Wall Street but, secretly, Americans love con artists–movies reflect that “love” just as Americans love hyper-violent heroes who shoot first and don’t even ask questions later–thus American foreign policy. The Tobin tax could have a chance but all politicians are bought off by the FIRE sector that depends on “churn” in one form or another and they, along with the alliance that keeps carbon fuel costs down, dominate the media almost 100% and thus a Tobin tax will never be discussed in the mainstream anytime soon.
I’d say that what most at NC can agree on is that our society is being run by criminals. Therefore we should not endorse any tax schemes they come up with because they can’t be trusted. I certainly do not support a carbon tax. It’s the perfect example of liberal legislation that creates the appearance of caring, which is the illusion the politicians behind it wish to create. The other problem with the carbon tax is moral hazard. Instead of individuals taking responsibility for making an environmentally friendly world, they pass it on to the Nanny state – the same leaders they don’t even trust. Again it’s the idea of appearing to care, which is so much easier than actually taking action.
I’d prefer to see freedom of choice, rather than a bunch of elites dictating to everyone. No carbon tax but also no government subsidies for other energy sources. Allow the market to decide. If resource depletion is the problem then such shortages will be reflected in the cost of such energy. It can’t be reflected if there’s continual government interference. More importantly, allow individuals to show their support for cleaner energy by their lifestyle choices. Environmental groups should be educating others, which they do. They should not be forcing people to change. That should be for the individual to decide. If we make the wrong choice then we get exactly what we deserve. All the environmentally friendly taxes in the world won’t change society for the better if the people in that society have no wish to change.
Don’t get me wrong, I can be as idealistic as anyone. It’s a nice idea to have a benevolent government leading society to a better place. The reality, however, is that our governments are made up of the worst members of society and their leadership can never lead to anywhere good.
I actually like your comment though I don’t agree with your market fundamentalism. Society is, indeed, run largely by criminals (not completely though it’s going in that direction) and it makes any tax scheme kind of pointless for the moment. This is why I recommend that the left unite with libertarians to radically change the system–I’m sure we could agree on many things. I’ve been much criticized on this site for advocating that. Still, do we have time to change the system before climate-change becomes truly threatening? I don’t know.
The Catch 22 with a carbon tax is taxing the US military. It is the single biggest generator of carbon pollution on the planet. So of course that particular tax will be paid by taxpayers because it’s the military. Or if the military is exempted then taxing everybody else’s carbon footprint really won’t be effective because the military will be blowing smoke as usual.
‘We can run out of land, but we cannot run out of acres.’
An acre is an immutable 43,560 square feet, just as a dollar was once defined as .0484 troy ounce of gold — no more, no less.
Selling a ‘hundred acres’ of land based on a self-defined 40,000 sq ft acre is a fraud, because the true area is less than 92 acres. One can (and damned well should) go to jail for a scam like that.
Tampering with the currency is a similarly egregious fraud. Illiterate French peasants understood in 1720 that John Law was stealing them blind. But at UMKC, John Law’s ornately-framed portrait beams beneficently from the walnut-paneled wall of the faculty dining room.
*bangs spoon on bowl*
More pudding, messieurs!
“‘We can run out of land, but we cannot run out of acres.’
An acre is an immutable 43,560 square feet, just as a dollar was once defined as .0484 troy ounce of gold — no more, no less.
Selling a ‘hundred acres’ of land based on a self-defined 40,000 sq ft acre is a fraud, because the true area is less than 92 acres. One can (and damned well should) go to jail for a scam like that.
Tampering with the currency is a similarly egregious fraud. ”
Indeed. Posted by someone with a properly measured and fully verifiable OUNCE of sense!
An acre is an immutable 43,560 square feet,
This definition makes sense. Acres and square feet are both units measuring the same thing, area.
just as a dollar was once defined as .0484 troy ounce of gold — no more, no less.
This definition does not make sense. It never did. It is like saying that “An acre of area is defined as .0484 troy ounces of weight” – which is crazy enough, but easy to see through. Areas are not forces or masses. But even worse because it introduces a substance, rather than dealing solely with units of measurement. And this additional confusion has succeeded in bamboozling billions into worshiping the Golden Calf.
Such “definitions” could be legally proclaimed – but legal proclamations do not change reality, change logic. As every mathematician knows, the Indiana legislature once came within a hairs-breadth of defining pi = 3. Legislatures have as little power to make dollars or pounds or rupees be a quantity of some metal as the Indiana legislature has over mathematics. The scam was in making a category mistake, pretending to make a nonsensical definition of a unit of indebtedness, of value, of hedge-against-uncertain-future, a denomination of a social relationship with a quantity of a metal. One might as well try to define marriages to BE a golden wedding ring of specified weight. What could that possibly mean?
Basically, we live in a world where the Indiana legislature was successful so long ago that people (the 99.9%) one way or another really believe pi=3, and to their endless detriment, design their circles and technology on this crazy belief. While the .1%, who supply the hexagonal circles, keep the truth about pi to themselves and ridicule anybody who exposes it. What the dollar “definition” above did was not to define dollars in terms of gold, or really to “back dollars by gold”. But essentially, it backed gold with dollars. Which was how “monetary metals” had come into use for commerce – by being backed by state fiat money in the ancient world. In other words, the daffynition declared to the world that Uncle Sam would exchange an intrinsically not terribly valuable metal, gold, for its intrinsically valuable, but purely immaterial fiat dollars; it would record itself as being indebted to those who gave it gold = government spending, and it would become a creditor of those who it transferred/sold gold to = government (financial) taxation. Uncle Sam, having watched too much late-night TV, set up a We-Buy-and-Sell-Gold Shoppe. This can make sense, if Uncle Sam has a lot of gold, and there are a lot of greater fools out there who want to buy it from Sam. Sam buying it makes less sense, but he did it just the same.
In a multipolar world like that of a hundred years ago, the mercantilist state that is accumulating gold is the one that gives value to the metal, not vice versa. Gold is valuable because it can be exchanged for mercantilist pounds or dollars, and these in turn are backed by the productive capacity of the mercantilist state, ultimately by the purely nominal taxation & spending of that state which is directing its entire economy, producing desirable exports that it gets for gold. The desirable exports give value to the gold, not vice versa. As Keynes said in the 20s or thereabouts, the price of gold was whatever a few central banks competing on making it higher was, or really just what the US Federal Reserve said it was.
From Yves’ intro to Wray’s post: “MMT advocates favor strong social safety nets and much higher funding of programs that promote social mobility like health care and public education.”
Yves, so did Obama.
We don’t have budget deficits or dollar deficits. We have a Democracy Deficit.
The whole concept of funding “for the public good” has been corrupted irretrievably. NC provides ample evidence of this every single day (and thank you again for that!). Until we get corporations out of the Constitution and out of the political system, I think we may need to work on democracy, self-sufficiency and mutual aid at a very micro-, even neighborhood, level. Certainly we cannot look to the corporate state to spend its hoarded treasure on behalf of the public.
MMT seems to me to be descriptive. For it to be prescriptive in a non-corrupt way, I think we would have to completely change the political system.
Hear, hear! Or at least be up front about the cultural values that it intends to support. Adam Smith at least came at his formulation through a theory of moral sentiments, panoptical reciprocity if you will. We now have the panopticon without any sense of reciprocity.
Even if MMT is good at describing the Ancien Régime, how good will it be in a new political system?
Do people want change?
Is MMT then an obstacle to change?
It seems the obstacle is human, more than likely something about exceptional-ism, individual and group.
skippy… highly correlated to fear methinks…
I think so. Humans can’t be trusted with unlimited powers.
No one is inferring unlimited anything, hence my “highly correlated to fear methinks”.
skippy… Now – Fear – can be unlimited, fear can be eternal and infinite, actually screw with a humans sense of time and space.
You have a point. Like the Constitution, it’s best to have balance of power, trust but verify, etc.
The Constitution would be nice, when is done being suspended.
Skippy… balance is also nice, tho, that’s a multivariate workout and somethings just don’t requite balance full stop…
No, if you read Obama’s pre-election speeches, he had very careful formulations that let him off the hook re his bait and switch. Those who were paying attention could see that Obama was clearly a neoliberal but the public was so desperate for a change from Bush that they bought the clever packaging. Robert Fitch’s great speech the week after Obama was elected for proof.
Okay, maybe our problem is the word “advocate.” MMT seems to me strong as a description of what IS. When it “advocates,” I don’t trust it. Do you? Having read Warren Mosler, do you? C’mon.
MMT describes monetary reality and “advocates” a prescription for policy changes, but it doesn’t change the RULES. And if we’re not changing the RULES, why waste our time? Those policy changes will never happen with the current RULES and RULERS in place.
MMT is a public education initiative. It’s so when someone tells you Social Security needs cutting because it costs too much, you know they’re lying.
I get that part.
MMT IS NOT EDUCATIONAL.
MMT is a clever cloak for theft/expropriation via dilution of existing currency via the printing press.
Changing the value of currency units by fiat is expropriation.
Changing the taxation of property units by fiat is expropriation.
MMT is not interested in growing the pie; only in seizing more of the existing pie via subterfuge, force or debasement of the monetary basis f accounts.
MMT = PURE THEFT.
BTW, of course I knew Obama was a neo- when he ran in 2008. As you say, Yves, it was perfectly obvious to anyone who was paying attention. I voted for him anyway. But I didn’t repeat that mistake in 2012, nor will a Democrat or Republican candidate for President ever receive my vote again.
But that don’t matter. The system ain’t broken. It’s fixed.
Which school[s drove the deregulation agenda….
“We can tinker with the tax, encouraging more outdoor living if that seems to be in the public interest—more open porches equipped with rocking chairs.’
I’m open to the other suggestions, but not this one.
From a health perspective, the last thing this country needs is for more people, regardless of age, to be incentivized to sit on their buts and rock the day away. Their should be a sin tax on rocking chairs.
“You cannot run out of a unit of measure!”
The core problem with Modern Money as a solution to our problems is that this statement has nothing to do with what is wrong with our country. No one says we’re out of inches. Some people want to use the idea of inches to build sustainable, affordable housing, while other people want to build prisons to abuse people.
And a third group of people don’t care whether we building decent housing or crappy prisons – they’re going to commit fraud on the construction and maintenance either way.
And could that third group include almost all of our politicians, whom MMT adherents (at least some of them) seem to believe will suddenly begin to act in the public interest? On what planet?
If you have Big Brother Murphy in charge, his law (Big Brother Murphy’s Law) is this: Any power that can be abused, will be.
That’s why we have to hope for another sibling, his little brother or sister.
No, MMT (among other things) is meant to counter the neoliberal “we can’t afford to have social programs because the government must ‘live within its means’ like a houseshold” blather.
Division is NOT multiplication.
You are confusing largess with expropriation.
This is the very worst type of colonialism.
I guess I would ask what the authoritarian psychopathy of neoliberalism has to do with faux, kabuki theater semantic debates about affordability?
There is a clearly governable majority of American citizens that supports rule of law and investments in the public commons. The bottleneck is management, not public opinion.
Well, I dunno about your dream hut, but mine is a cement bunker, maybe 20 by 30 ft, with good plumbing. I’d like windows across the front for passive solar, and yes, a porch with a rocking chair. In the very center of the floor of my dream house I want a 10 inch drain, with an ornate cast iron cover. Every year I’d be able to hose the whole damn thing out with a high-pressure nozzle and call it good. Whether it needed it or not.
No professor would ever advocate the imposition of any tax on (1) goofing off, (2) propagating bad ideas, or (3) teaching errors to the young; it is too clear who would have to pay those taxes.
Now it is in the news that Hillary Clinton has been very actively hiding her wealth from the very taxation regimes that she has been publicly and professionally advocating for decades.
Rule #1: always fear proponents of taxation regimes. These types are always bent on confiscating the assets of other People to fund their interests while doing everything in their power to avoid falling prey to their very own schemes and those like them.
DEATH TO THE TAX ADVOCATES.
In the up-side-down-and-backwards MMT universe everything divided is multiplied!
There will never be any inflation! Instead of raising prices portions will simply be shrunk infinitely without any consequences!
Today a pound is 16 oz. for a 100 cent dollar.
Tomorrow a pound will be 15 oz. for a hundred cent dollar.
Next year a pound will be 15 oz. for a 90 cent dollar.
Were all saved from want thanks to the blindingly bright brilliance of MMT !
Please detail your reasoning on effective demand.
Please detail your reasoning on effective supply FIRST.
You MMT Imbeciles have EVERYTHING 100% BACKWARDS.
There are NO Unicorns.
It does NOT matter how much money You have.
It does NOT matter where You get the money: earn the money, tax the money, print the money, steal the money; IT DOES NOT MATTER.
SUPPLY IS ALWAYS more important than demand.
NO MATTER HOW MUCH MONEY YOU HAVE, NO MATTER WHERE IT COMES FROM; YOU CANNOT PURCHASE A UNICORN: THERE IS NOOOOOOO SUPPLY!
THAT IS YOUR FATAL MMT FLAW. YOU HAVE EVERYTHING BACKWARDS!
I was a little disappointed that naked capitalism hadn’t picked up on Ta-Nehisi Coates Atlantic magazine article on U S racial discrimination against blacks in America. It is long and well written on The Case for Reparations and you can read it online here http://www.theatlantic.com/features/archive/2014/05/the-case-for-reparations/361631/
The website is now online with a running discussion of differing views.
I had taken a contrary view 20 years ago and thought little about it since but having read the piece, I find my mind almost completely reversed. Details need to be worked out in public discussion. But for now, read the piece. And think about it. It is time for a major change in attitudes that remain frozen and it is so overwhelmingly economic that it fits in with NC’s views on bank exploitation of borrowers and anybody else they can find to cheat.
Entirely missing from all these discussions is the concept of personal freedom and the responsibility to make decisions free of government oversight. Why does everyone believe they have defined what is good, the truth and best for society. Sure there are always some things needing government oversight, but there must be clear limits.
All the foolishness about taxing big houses and supporting green energy is best exemplified by Californian residents that must support green tax credits through broad taxes and utility bills with all the benefits going almost exclusively to the well-off. And why tax carbon? That proportionally hurts the poorest people and is an inconsequential cost to the well off.
Is my 120 year old house that is already built, better or worse that building a new energy efficient house or doing a major $200,000 renovation? Seems clear to me that an extra $2,000 in energy costs is not worth the $200,000 renovation.
How do rules account for the complexity and changing world. Best to leave these decisions to the individual who can make decisions on their own, and not to some rule making body of well educated people of good intentions and always limited life experience, inherently disconnected from an always changing world.
Personally I support a very flat tax for individuals and corporations, with a broad sales tax and with few incentives to drive behavior. I prefer to let everyone make their own decisions and not have the “government” trying to modify behavior through tax policy. Over time this always leads to entrenched interests that are inefficient but married to tax incentives.
You should read up on human excrement and individual rights throughout our species history. Free market ethos under the guise of personal freedom PR – Marketing shtick worked wonders in Haiti.
skippy… hint the orb is not your backyard.