Yves here. While some readers will recoil at the suggestion, late in the article, that the US Federal government move towards less progressive taxation, looking at taxes alone is a misleading guide as to whether government interventions are progressive or not. For instance, taxation in Europe is regressive due to the large role of the value added tax and other consumption taxes. However, most countries have very progressive spending. By contrast, as top tax expert Lee Sheppard described the US tax system pre the passage of the Trump “reforms”:
US income taxes are progressive. Spending is not, so the system as a whole is not redistributive.
By Maxximilian Seijo, a graduate student in the Humanities & Cultural Studies Department at the University of South Florida
On November 15th, 2017, Paul Ryan spoke on the House floor in support of the Foundations for Evidence-Based Policymaking Act. He said:
I want to especially thank Senator Patty Murray for her willingness to work together on this issue. We may be on different sides of the aisle, but there’s one thing we passionately agree on: what government does, it should do well. The taxpayer’s money should always be protected, and that is exactly why we came together to write this bipartisan legislation.
Perpetuated by both Republicans and Democrats, the orthodox conception of “taxpayer” money, as seen above, permeates contemporary fiscal discourse.
This conception concludes that federal spending is contingent on tax “revenue,” and calls upon the taxpayer to make sacrifices to ensure supposed “fiscal solvency.” In doing so, it artificially constrains the federal government’s ability to appropriate funds to meet the needs of its polity, and perpetuates continued unemployment.
Modern Monetary Theory (MMT) has long argued against this orthodox vision, attempting to educate academics, policymakers and the public at large that fiscal spending is not constrained by deficits, but real resources. Given the recent passage of the Republican tax bill, and Paul Ryan’s call for entitlement cuts in its wake, this debate surrounding the taxpayer is as urgent as ever.
In order to shatter this orthodoxy’s stranglehold on it once and for all, I argue, we also need to construct an alternative image of the taxpayer, one that empowers everyone in a shared potential for public prosperity.
At the recent International Conference on Modern Monetary Theory (MMT) in September, 2017, some scholars on the Humanities panel – to which I also contributed met this challenge with nuance and vigor. During the panel, professor of rhetoric William Saas provoked attendees present and online by putting a positive spin on the “taxpayer” trope, which MMT expressly rejects. In his talk, Saas affirmed MMT’s basic theses on taxpayer money. Namely, money is an unlimited public monopoly and the taxpayer in no sense funds fiscal expenditures. Somewhat counter-intuitively, however, Saas then sought to recuperate the figure of the taxpayer in service of MMT’s broader political project.
First, Saas drew attention to the taxpayer trope’s wide social appeal. Next, he claimed that, rhetorically speaking, the trope’s function is not primarily to reify neoclassical conceptions of money and fiscal policy but, rather, to call government officials and policymakers to account for their stewardship over the economy. As he put it,
When people object to [Steven] Mnuchin’s government-funded getaway or the expenditure of trillions of dollars to finance our military, they are probably objecting first to the perceived bad behavior of their representatives and other officials in Washington rather than to the violation of some sacrosanct principle of home economics.
Last and most important, Saas argued that the taxpayer figure calls into being a far more capacious political subjectivity than either the generic figure of the “person” or the exclusive category of the “citizen” permit. Neither a de facto emblem of zero-sum economics nor a necessary lightning rod for sexist and racist resentments, the taxpayer is first and foremost a political subject who is capable, in Saas’ view, of making a “robust and inclusive claim on representative government.”
Saas’ intervention caused quite a stir, and his paper dominated much of the panel’s question and answer session. Many attendees rebuffed Saas’ challenge, cautioning of the dangers of attempting to turn the taxpayer trope toward positive ends.
However, MMT heavyweights like Bill Mitchell and Warren Mosler seemed more amenable to the provocation. To one attendee’s rejoinder that the taxpayer is not an open and inclusive political subject since not all persons are subject to a tax, Mosler asserted that taxation must be understood in a more general sense as any monetary obligation to government, be it a tax, fee, or fine. Because every money user owes the currency issuer in some form or another, Mosler suggested, the taxpayer does involve the sort of inclusiveness for which Saas is arguing.
Here, I want to deepen and complicate Saas’ critical gesture. To be sure, the taxpayer, and the tax that they pay, are central figures in the governance project MMT describes. Yet I would go further. I contend that MMT permits us to redeem the tax as a social form and to make it the basis of a political demand for full employment.
As MMT demonstrates, taxation drives a currency by obliging persons to work for money that will satisfy their obligation to the government. It does so by disemploying the populace, creating unemployment as a ubiquitous condition involving all currency users.
What MMT reveals, then, is that the ubiquity of tax-induced unemployment lies at the heart of the money relation and the social production it enables. For this reason, I claim, it is essential to foreground the tax relation in MMT’s call for full employment. The result would reimagine the form of the tax itself. If approached thoughtfully, this reimagining could initiate a broad shift in social attitudes that frame the potential of governance with greater force and clarity.
We cannot continue to rely on liberals to define the tax relationship. We must reconstitute it on MMT’s own terms, divorced from failed concepts of “revenue” or “redistribution.” We must conceive of the tax as a ubiquitous socializing force and mobilize its potential for inclusive prosperity.
The Sacred Burden of Money
The link between the tax and unemployment emerges in the origins of modern chartalism, which consists of a fusion of the works of A. Mitchell Innes and Georg Friedrich Knapp. Knapp concludes that money is the “definitive” means of payment originating from a “creation of law.” To create this “definitive” means of payment, Innes explains, the government obliges the populace to “become its debtors” by “levying a tax.” This initial debt forces subjects to work for the currency in which the tax is denominated. Thus the tax for these early chartalists sits at the center of social obligation and production.
In setting forth this argument, Knapp and Innes imply that the tax is a qualitative, in addition to a quantitative relationship. MMT would later tease out this qualitative dimension.
Whereas the quantitative understanding serves orthodox politics of redistribution, the qualitative character of the tax affords a wider array of policy possibilities. I want to place the qualitative dimension of the tax at the center of contemporary employment politics and rethink the structure of the tax in such a way that foregrounds the reciprocal obligation between the currency issuer and users. We are bound in a covenant wherein money users owe labor to society and the money issuer owes employment to its populace. What is the best way of making this qualitative relation felt?
We find hints of how we might do so in Innes’ own writing. In his canonical essay, “What is Money?”, he characterizes the money relation as a sacred one. He speaks of the “sanctity of the [debt] obligation.” The word “sanctity” being defined as “the state or quality of being holy or sacred.”
Within this context, Innes’ statement that “the sanctity of an obligation is, indeed, the foundation of all societies” is a radical claim that places the qualitative indebtedness of the tax central to all social existence.
Further, the sacred aura of this statement could be extended in ways that Innes doesn’t address. The broader historical context of modern Christendom provides an interesting frame in this regard. A recent essay published by Scott Ferguson and Brendan Cook contrasts the quantitative limitations of modernity with a more open and qualitative understanding of governance within Christendom.
Where the Reformation’s underlying zero-sum logic made “the limitation of public spending seem natural and inevitable,” the era of Thomas Aquinas and Dante envisioned “a capacious and expansive understanding of law, government, sovereignty, and, above all, of currency” as still possible. The possibility in the era of Aquinas and Dante can be tied to its openness to a co-present sense of being, a sense that God was everywhere all-at-once. Evocative of abstract money, this sense enabled an open and “expansive” understanding of currency.
To create taxation that mirrors this sacred sense, we must make evident that taxation and money are literally everywhere, at all times, furnishing social production and consumption through the sanctity of co-presence. It is often easy to forget, as we all rightly indict orthodox thinkers for claiming that taxation funds government spending, that taxes actually do fund government spending, but not quantitatively as orthodox thinkers suggest. Taxes fund government spending qualitatively by enabling this co-presence in the social covenant of obligation.
Emphasizing the qualitative dimension of the tax in this way should seem radical. Both money’s all-at-once-ness and Innes’ debt obligation are radically illiberal descriptions of modernity. They reject contracted reality and conceptions of will and voluntarism that form the ideological commitment of liberalism. They make clear that societies do not form from amalgamations of marginal economic contracts, and that the realm of the political is not furnished by liberal notions of the “social contract.” One doesn’t choose to be a member of a society, membership is determined by a centralizing obligation to participate in a society, an obligation that exists everywhere in this sacred co-presence.
In deriving social understanding from these foundations of chartalism, we must recuperate the tax as a ubiquitous socializing mechanism. Because we are now free from the liberal confines of quantitative “revenue,” our tax policy must first and foremost be tasked with foregrounding this ubiquity.
Reclaiming Tax Policy
Before we rethink the nature of taxation and spending in this vein, it is worth asking how these notions take shape as policy.
One area of the world that partially elucidates how this conception of taxation could function is Western Europe. In Western Europe and Scandinavia, the burden of taxation is closer to being ubiquitously present than it is in the American context. In 2016, every OECD country with a tax-to-GDP ratio greater than the OECD average of 34.3% was European, with all but two (Greece & Slovenia) hailing from Western Europe or Scandinavia. In comparison, the United States comes 31st with a tax-to-GDP Ratio of 26%.
Many of these European countries with high tax-to-GDP ratios don’t spend nearly enough to overcome the un-employing and deflationary effects of this tax burden. In fact, this under-spending is directly tied to political constraints that have crippled many EU economies.
Notwithstanding, it is evident in the fiscal design of many of these nations that there’s a social and cultural openness to universal social programs and fiscal intervention that correlates with further foregrounding taxation as the central socializing force of social obligation.
In contrast, the vast burden of debt in the United States originates from private sources. One could even conclude that the US’ relative acceptance of privatization is significantly contributed to by this dynamic
My claim is, then, that baseline taxation regimes — excluding “Pigouvian” measures like wealth taxes, carbon taxes, alcohol taxes, etc. — should be less progressive and should foreground the indebtedness of all citizens in a sacred public relationship.
To make up for the inequality effects of these proposed burdensome tax regimes, government spending must nearly always outpace its “revenue” through even higher levels of money creation. In short, governments must spend even more to offset the un-employing, deflationary effects of an evenly distributed baseline of taxation that is qualitatively necessary. This could take the form of multiple structures, designed to address specific national needs. One design that jumps out as potentially viable is the per capita lump-sum tax.
Often called a “head tax,” the per capita lump-sum tax is lauded by orthodox economists for its supposed “Pareto efficiency.” Of course, I am proposing it here for vastly different reasons. In my mind, an equal lump-sum tax assessed to each man, woman, and child in the country gets closest to making complete the ubiquitous co-presence of the debt obligation.
It goes without saying that any regime that would ascribe a $10,000 tax bill to every man, woman and child in the United States would need complimentary spending programs that ensured that every man, woman and child had the means to pay such a debt. Such a tax would function as a social baptism that makes ubiquitously evident the nature of social existence within our modern apparatus of state governance. Now that we are free from the constraint of “revenue,” we are free to perform our taxation. The context of performance as conceived here owes much to Judith Butler’s post-structuralist gender theory. Butler posits that structures of gender are malleable, and that the best way to make evident their malleability is through “performativity.” The most obvious example of this idea is the performance of a drag queen. When a biologically male person dresses flamboyantly and adopts the female gender “role,” they make evident that previously assumed gender structures are conceptions of orthodoxy that mustn’t persist as a rule of “natural law.” Likewise, my baptism of taxation “performativity” seeks to make evident that antiquated orthodox notions of taxation are failed conceptions of a liberal era. In transcending this failed era, we must understand that the form of the tax itself is the only thing that provides us with a claim on governance and employment. Without it, we are left adrift in the wind of uncentered privation.
When Saas noted that the category of the “taxpayer” is a more “robust and inclusive claim on representative government” than the category of the “citizen,” he lifted the veil on an idea with profound public policy implications. In fact, the tax is the most “robust and inclusive” claim on representative government. Therefore, if we are to “reclaim the state,” as MMTers Bill Mitchell and Thomas Fazi propose in their recent book, the left must re-establish the tax as the ubiquitous claim on governance that it always was.