A high quality video of the seminar is currently being edited. In the interim, please see the livestream recording below.Note: the debate begins at 22:08.Money and Public Purpose
(h/t Rohan Grey on FD)
A high quality video of the seminar is currently being edited. In the interim, please see the livestream recording below.Note: the debate begins at 22:08.Money and Public Purpose
29 comments:
By the way, Tom, we are moving from MMPP to "The Modern Money Network", or MMN (pronounced "MaMoN" ;-)), so please use that from now on.
The MMPP name will refer to the 2012-2013 seminar series only, not the broader network.
Regards,
Rohan
Tom,
Do you support a maximum wage? I think it would possibly have an expansionary effect, as opposed to raising taxes on the rich.
Thanks.
Thanks, Rohan. Noted.
Do you support a maximum wage? I think it would possibly have an expansionary effect, as opposed to raising taxes on the rich.
I'm with Michael Hudson on distinguishing economic rent from productive contribution and taxing away economic rent.
I don't see either a maximum wage or "raising taxes on the rich" as working. I think that an argument can be mounted for taxing economic rent while exempting productive contribution.
Tom and Tyler, In my view, the purpose of high tax rates on the rich would primarily be to encourage philanthropy. "If I can't keep it, then I would rather give it away!" You can also make sure that the philanthropic giving away meets societal goals.
Get back into the era of large philanthropic foundations.
I don't think it is possible in this environment to effectively "raise taxes on the rich." The country is too divided, the rich pretty much control the political process, and "taxing the rich" by itself comes across as class envy.
Then the argument becomes about "paying one's fair share," and that everyone needs to have skin in the game.
Conversely, I think it is pretty straightforward to argue that gains not earned through work or else accruing from investment in production or through an entrepreneur's equity should be taxed instead these productive contributions in order to incentivize productive contribution and disincentivize extraction.
This is essentially the same argument that is used now to justify taxing the rich less in since they are the "job creators." Of course, that is easily shown to be nonsense for the most part, since most of the gains that are not taxed or taxed at a lower rate than ordinary income are due to economic rent of some sort.
Seems to me the Austrian guy doesn't understand sectoral balances. According to him, when everyone slows their spending and attempts to run a personal surplus (driving the economy into a recession), then the last thing govt should do is run a deficit... He'd have us in a permanent depression.. He even said that the austrians focus on the micro. No wonder he doesn't understands that it's not possible for all agents to run a surplus simultaneously..
I'm for a maximum wage, as well as for taxing the snot out of the rich as a preliminary stage in building the new income structure.
The thing with "economic rent" is that the concept was re-defined by neoclassicals to make most of the return to ownership look benign and legitimate.
But here's the old classic, easy-to-understand concept: if you own a field, and don't do any work to raise crops on it, but nevertheless derive an income from it by permitting others to raise crops on your "property" in exchange for some of the product, then you are collecting rent.
If you own a factory, and don't do any work in it, but nevertheless derive an income from the factory's output, you are collecting rent.
If you own a piece of paper, and don't do any work related to that piece of paper one way or another, but derive income from it as a dividend, then you are a rent-collector.
Rent is the ill-gotten exploitative use of others for one's own profit, and flows from the original sin of private ownership. Maybe private ownership is something that fallen man must rely on to some extent in order to prosper from the dynamism of human avarice and self-assertion, but it is all tainted.
"Rent is the ill-gotten exploitative use of others for one's own profit, and flows from the original sin of private ownership. Maybe private ownership is something that fallen man must rely on to some extent in order to prosper from the dynamism of human avarice and self-assertion, but it is all tainted."
So Dan..... judging by your comments and just to clarify my thinking, would I be off base to say that you do not support property rights?
"Conversely, I think it is pretty straightforward to argue that gains not earned through work or else accruing from investment in production or through an entrepreneur's equity should be taxed instead these productive contributions in order to incentivize productive contribution and disincentivize extraction."
Tom - I reckon I get your point in general terms, but I am wondering if you can offer up a specific program or recommendation. As I believe you know I am very interested in this subject, which is why the current IRS scandals give me hope for meaningful tax reform. Personally I favor a 10% across the board flat tax on all sources of income.
This includes 10% tax on earned income which would eliminate virtually all itemized deductions and instead offer a generous standard deduction such that a family of four with annual income of $50K would be exempt and would only pay the 10% rate on each dollar of earned income over above $50K.
Beyond that, interest income, dividends, capital gains, estate tax, corporate tax and social security tax would also go to a simple 10% flat rate. In the case of the social security tax, 5% would be paid by the employee, 5% would be paid by the employer and the income ceiling that the tax applies to would be eliminated. If you do the math, you will find that regardless how much income one earns and from whatever sources, the maximum effective tax rate would never go any higher than 18.75%.
Simple enough for a 12 year old to figure out on a 3X5 index card. Moreover, even though it's called a "Flat Tax", the generous standard deduction and elimination of the income ceiling on the Social Security payroll tax makes it quite progressive which theoretically should garner political support from the Left.
Any takers?
No takers ultimately among the libertarians Ed....
they would have to admit that our govt possessed monetary authority in the process so "no deal" for the hardcases in the libertarian camp...
btw iirc your proposal sounds like something Dick Armey came up with back in the 90's, but then he got all bound up in his "Freedom Works" (keyword here being the "freedom" one) and that took care of that...
rsp,
"Personally I favor a 10% across the board flat tax on all sources of income."
Great, then the top 0.1% will accumulate wealth at an even more ridiculous rate than they are now…what could possibly go wrong?
It doesn't appear that you grok the reasons for taxation. You seem to look at it as a punitive measure rather than something that maintains the stability of capitalism, which, if left unchecked would self-destruct.
The Republicans that implemented the progressive income tax that built the middle class understood this well.
The money that is taxed away from the top doesn't do anything…it just sits there (except when they use little bits of it to buy influence).
What is Apple's cash doing?
"they would have to admit that our govt possessed monetary authority in the process so "no deal" for the hardcases in the libertarian camp..."
Matt - Libertarians would say repeal the income tax altogether, which doesn't sound so bad to me, but the odds of that happening seem remote. Ron Paul likes a flat tax.... at a rate of zero percent. Hmmnnn.... almost sounds like Fed policy.
"btw iirc your proposal sounds like something Dick Armey came up with back in the 90's, but then he got all bound up in his "Freedom Works" (keyword here being the "freedom" one) and that took care of that..."
Dick Armey and Steve Forbes promoted a 17% flat tax on earned income and 0% tax on interest income and capital gains and no itemized deductions. Conceptually I agree with 0% on capital gains because what we really want to do is unleash capital. It would be too hard to sell politically though, so I default all sources of income to 10%.... like with the Biblical Tithe which may appeal to those voices here who are religiously inclined.
Regarding interest income, it doesn't seem right to me that someone who has managed to save some after tax income, i.e. income that has already been taxed, should have to pay tax on it again. That said, I wouldn't want someone who was born with a silver spoon in his mouth and who has nothing to do but clip digital Treasury coupons, not have to pay any tax just like everyone else. So... again I default to the 10% solution.
"The Republicans that implemented the progressive income tax that built the middle class understood this well."
The combination of making the first $50K of earned income tax exempt for a family of four by way of a generous standard deduction along with eliminating the income ceiling for the Social Security payroll tax would be very progressive.
Taxation is the power to destroy and only the power to destroy.
Given this, the only logical tax policy are taxes against the practices you don't like i.e. "sin taxes" or taxes on competition you wish to outcompete.
A taxes on domestic labor and capital are therefore internal tariffs which destroys the nation's ability to be productive.
The only people you want to target with taxation are people you don't want to spend or people that are you destroying other's ability to spend. There are only to 4 kinds of people that are in that category are importers who export dollars thus preventing domestic consumption (currency pirates), chronic polluters, rentiers i.e. legal extortionists, and speculators aka legal gamblers of other people's money.
All taxation must fall upon those categories and no others given MMT. Tariffs, Commercial property taxes, Environmental Taxes and Tobin Taxes are the only rational form of taxation.
Ideally for tariffs if you could only tax the transfer of money from sales to outside the country that would be better than taxation of the goods before they enter the country. If you do that way then foreign businesses have to setup shop in your country i.e. outsource their production.
"Given this, the only logical tax policy are taxes against the practices you don't like i.e. "sin taxes" or taxes on competition you wish to outcompete."
septeus7 - What you declare to be sinful may not be the case with other people. Regarding whether imports are "sinful", who died and left you boss?
"The combination of making the first $50K of earned income tax exempt for a family of four by way of a generous standard deduction along with eliminating the income ceiling for the Social Security payroll tax would be very progressive."
That doesn't qualify as progressive in any meaningful sense of the word.
It allows for most money creation to be captured by a tiny subset of the population. You may like that idea but the rest of us would have to be idiots to stand by and allow it to happen. It's gone far enough already.
The system is designed so that all money flows to the top 0.1% or less mathematically…That is a death knell for democracy or any chance of relative equality of outcomes…no matter how hard the masses work the wealth all makes it to the top relatively speaking because profit strips wealth from the masses to serve a few.
I don't care if a doctor makes 10 times the average worker…I'm OK with a CEO that earns 10 or 20 times more.
1000 times more than the average worker is ludicrous, and the only practical way to eliminate that kind of outcome is to tax all wealth beyond some threshold at nearly 100%. It worked well for 50 years and it will work weell again.
Beyond some premium for education, skills, value to the system and other intangibles that give some higher incomes than others gains must be distributed in a way that no one group gains at a higher rate than another.
The guy that makes a billion dollars/year does not work 1000 times harder (or smarter) than the guy that makes a million/year…
…he/she is just better (or luckier) at gaming the system.
Some of us just want to work, raise our families and live a reasonably comfortable lifestyle…we aren't trying to succeed at the expense of everyone else.
"The combination of making the first $50K of earned income tax exempt for a family of four by way of a generous standard deduction along with eliminating the income ceiling for the Social Security payroll tax would be very progressive."
"That doesn't qualify as progressive in any meaningful sense of the word."
Why not? Under the present tax code the super rich pay very low effective tax rates because of all the loopholes. The multi-billionares like Warren Buffet who pay an effective tax rate of 17% because they shelter so much of their income in the Bill & Melinda Gates Foundation are not really subject to progressive taxation.... are they? Or better yet, how about Mitt Romney who only pays an effective tax rate of about 14%. Only the modestly upper income groups who earn $200K to $1million or so get taxed at the highest marginal tax rate.
"It allows for most money creation to be captured by a tiny subset of the population."
I agree with you about the growing income and wealth disparity between the 1% and the 99%, but I think it has a lot more to do with fiat currency and a massively convoluted and byzantine tax code that can be gamed by the super wealthy but not by the middle class.
The guy that makes a billion dollars/year does not work 1000 times harder (or smarter) than the guy that makes a million/year…
…he/she is just better (or luckier) at gaming the system."
How about putting a stop to crony capitalism? I'll make you a deal. Why don't we levy a very high tax rate on those CEOs and executives and corporate incomes of those companies that only know how to profit from the public feeding trough?
Edward Snowden who is now on the run and the company he contracted for, Booz Allen Hamilton, is but one small example of the army of well paid operatives who profit handsomely from gaming the military industrial complex, and the educational industrial complex, and the financial industrial complex, the healthcare industrial complex, the agricultural industrial complex... etc, etc and so on. I say tax them aggressively and leave the rest of us alone.
"Some of us just want to work, raise our families and live a reasonably comfortable lifestyle…we aren't trying to succeed at the expense of everyone else."
Paul, success need not come at the expense of everyone else. Can't you even conceive that some people through their talent, intelligence and drive make everyone that much richer? It doesn't have to be a zero sum game.
Ed,,you seem to be misunderstanding me...I'm in agreement that we should back off of the 99% of us that don't take advantage of the system...I agree with nearly every point you made in your last comment.
My criticisms are directed at the tiny subset of vultures that you've also alluded to in your comments. My plea to tax at nearly 100% above some threshold would leave 99% of us unaffected.
" It doesn't have to be a zero sum game."
Mathematically it's a zero-sum game unless the government net-spends.
This isn't an opinion...it's arithmetic. No other outcome is possible.
Profit is as much a result of luck and timing as it is any of the other qualities you've enumerated. I'm not opposed to profit, only grotesquely high profits...again, very few are guilty of this but those few have brought the system to it's knees.
Thus, if the distribution of saving isn't managed somehow, inequality gets our of control. Control of this one thing is necessary if you want capitalism to survive.
I'm all in favor if staying out of other people's business...until they demonstrate they have no social conscience.
I believe a maximum wage would be expansionary because it would force the rich to either increase their employees' compensation or lower prices.
> If you own a factory, and don't do any work in it, but nevertheless derive an income from the factory's output, you are collecting rent.
And we've known that factories don't come from "factory fairies" for 200 years now.
Many people own capital goods because they saved their income and bought capital goods with their savings.
Many people don't see why their new factory income (their investment income) should be taxed away completely.
On the contrary, many economists believe that we would live in a wealthier society if investment income were not taxed at all. We need more investment, not less. That's just the development economics consensus.
I think the wishful thinkers who disagree have more in common with climate-change deniers and anti-evolution skeptics than they'd care to admit.
Peace.
According to functional finance the sole reason to tax is price stability. The sectoral balance approach shows the appropriate size of the fiscal balance. Then the balance of spending and taxation is a political choice but this choice needs to be guided by economic considerations rather than purely as a matter of ideology.
The other reason to tax is to discourage behavior such as negative externalities. Economic rent is a negative externality.
There are essentially three ways to affect behavior politically, legislation, regulation, and taxation. The most appropriate means is to be selected for specific cases. Taxation may or may not be the most appropriate means in different cases.
For this reason, flat taxes and other arbitrary proposals are ill-conceived in that they are based on the mistaken assumption that currency issuers sovereign in their currency need revenue for funding.
Quote: "septeus7 - What you declare to be sinful may not be the case with other people. Regarding whether imports are "sinful", who died and left you boss?"
I understand that what I consider "sinful" i.e. damaging to other people economic opportunities" is not a universal.
What this proves is that economics is a political issue grounding different ideas about how humans ought to live which necessarily leads to broad political groupings hence if freedom means anything then it ought to be the right to entities respecting the political self determination of various peoples i.e. sovereign nation-states hence any idea of libertarian free trade is anti-freedom.
I could very well flip the question around and ask who died and made you god to determine that all imports are equally good to all peoples?
You're the one making the claims that all trade is good. I'm saying not necessarily and yet you libertarian act as if you assumption are the neutral default and that I have the burden of proof for stating a negative position. You claim the following is true for all people at all times everywhere that the sellers of goods should be able to those goods to whoever is willing to buy regardless the nature of the factors of production required to produce and obtain those goods i.e. free trade.
I'm saying no... the factors of production and conditions of labor matter for the nation is an objective fact. You claim to apolitical in determination that all trade is good simply by denying facts and you gall to claim that I'm the imperialist?
Wrong! I'm the nationalist and you're the aggressor imperialist who claims to rule over the entire world based on your apriori praxeological assumptions.
The issue is political and thus any claims to be able to create a libertarian economy is by definition a political imposition on those to who wish the right to political self-determination and thus any form of political anarchism is in fact a tool of imperialism.
History shows this to be the case as anarchism is used over and over again as a wrecking tactic against true republican movements.
The Rombach Report said...
"Personally I favor a 10% across the board flat tax on all sources of income."
It has long been known that the most efficient form of taxation is one that falls on economic rents. Unlike other taxes, a tax on economic rents not only doesn't add to price, it can keep prices down & in line with the cost of production.
It has long been known that the most efficient form of taxation is one that falls on economic rents. Unlike other taxes, a tax on economic rents not only doesn't add to price, it can keep prices down & in line with the cost of production.
Yes, the point being that economic rent is a distortion of price discovery that would occur in a perfectly competitive market. Economic rent is a market imperfection, hence a negative externality, the cost of which is socialized.
@ The Rombach Report
Why should income derived from work be taxed at the same rate as income derived from privilege?
Why should the income a man earns by the sweat of his brow be taxed the same as that income a landlord earns "in his sleep"?
Whereas Feudalism had rewarded according to privilege, was not Capitalism to reward according to work?
@1:58:00
Mr. Murphy states that the government should issue no money & collect no taxes.
Without money & taxes how can there be a government?
Does Mr. Murphy truly advocate the abolition of government?
If so, I don't think he understands what he is saying.
If there is no government there is no private property, no corporations, no public police/fire/ambulance service, no public legal system to enact, police & punish violators of law, no mechanisms for private parties to peacefully settle disputes, no way to enforce contracts, to punish cheaters, to compensate victims, no justice.
Without trust, markets cannot exist.
How can voluntary exchange take place in such an environment?
If Mr. Murphy thinks he can rid human society of government he's sorely mistaken.
Every human society, from the smallest to the largest, hunter/gatherer, agricultural or otherwise, has some form of government.
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