Taxation is about reducing spending. That is its primary purpose, in aggregate, - to stop the system overspending its capacity.
Once you understand that, then you quickly realise that people actually tax themselves. It's often called saving. That reduces the amount of spending an individual does - which is the primary purpose of taxation. So we can call saving - specifically saving in excess of investment - Voluntary Taxation.
And that gives the simple equation:
Voluntary Taxation + Compulsory Taxation = Government Investment
which simplifies to:
Taxation = Government Investment
for those with a correct understanding of what taxation actually is.
Why not just substitute "saving" for "taxing" and get rid of the bugaboo of "taxing." Government saves by income (revenue) the same way everyone else does. So if spending is "bad," then saving is "good."
9 comments:
Voluntary Taxation + Compulsory Taxation = Government Investment.
Shouldn’t that be: Voluntary Taxation + Compulsory Taxation = Government Spending?
I.e. government spending is not necessarily investment spending: in fact most of it is current spending.
Ralph,
Yes, it should be. But I guess "investment" sounds better than spending.
Plus calling saving "taxation" is just a non starter. Hey, I can either save 50k or be taxed 50k, it is saving anyway, same difference! 99% of people will think this is nuts.
I am not sure MMT needs such far fetched sophistry, it is just not helpful.
Nah, 'voluntary taxation' is completely wrong. When you save you don't lose possession of your savings, they're still your property.
Neil is answering at his place.
Semantically, what he is saying is look to the macro denotation (economy-wide) rather than the accustomed connotation, which is micro (in this case personal).
Saving is already sufficiently overloaded. I'm not sure certain brains could cope with yet another definition.
I've found it very interesting how the article as routed out preconceived ideas and beliefs. That has been fascinating.
Neil,
You are confused at a very basic level. Definitions are not beliefs. They are names. Theorems are beliefs. Sometimes names can confuse, like with the word "saving", which most people understand as unspent income, but economics defines as unconsumed income. This leads to confusion. No need to multiply this confusion by inventing new definitions opposite to the everyday meaning of the word. You apparently know nothing about methodology or science but are quick to offend everybody. That is just lame. Apparently the opinion of MMTers as arrogant is true. I am arrogant as well sometimes, just trying not to be when I have no idea what I am talking about.
Agree with PeterP.
I can see this idea appealing to those who believe in Ricardian equivalence.
Neil Wilson:
Hi Neil. I always find your writing some of the easiest for me to understand.
Since I can not yet really grasp the role of reserves very well, I think you should write a post on the role of reserves.
And if the UK system works differently, that's ok, whatever you write about the UK will, I'm sure, help me to understand the US system.
Thanks, I look forward to reading your new post soon :)
Thanks,
Jason's mom.
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