Tax Justice and Modern Monetary Theory – A Guide — Yves Smith

Yves Smith:

I think Modern Monetary Theory proponents have made acceptance of their ideas a bit more difficult by not drawing a bright line between their theory, which is a description of how government spending works in a fiat currency system, versus what they believe are resulting sound policy approaches, such as setting the price of labor (a Job Guarantee) rather than the price of money.

Some folks seem slow on the uptake. How loud to MMT economists need to shout? (shakes head)

Why is the MMT position that MMT economists shares and have written about exhaustively so difficult to grok?

I suspect it is because MMT uses a different lens for looking at macroeconomics and political economy, while others continue to look through their own accustomed lenses.

Hello, MMT is not essentially about tax justice. That is a different subject that informs political economy and it is chiefly a political matter, as implied by the term, "justice." "Justice" is a legal term, not an economic one.

Political economy intersects with philosophy, sociology, evolutionary theory, anthropology, sociology, political theory, law and justice, etc. The MMT economists are doing macroeconomics, which is their field of expertise. Because MMT is a type of institutional economics that also builds on Post Keynesianism and other influences, it is difficult for other economists to categorize so they try to force it into a box that doesn't fit.

When MMT economists venture into policy, they do so personally. Macroeconomic is policy-neutral other than in its assumptions. But the commonly held assumption among macroeconomists is that the chief aim of macroeconomics is explaining the relationship of growth, employment and price. MMT offers a unique approach to this using a different lens to look at the data and issues and to construct models of different types of systems.

Naked Capitalism

Tax Justice and Modern Monetary Theory – A Guide

Yves Smith

Crosspost of a post by Richard Murphy

Modern Monetary Theory and the Changing Role of Tax in Society — Richard Murphy

I have a new peer-reviewed journal paper out this morning on a theme many on this blog might be interested in.

Tax Research UK

Modern Monetary Theory and the Changing Role of Tax in Society
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

Bill Mitchell — Tax the rich to counter carbon emissions not to get their money

Tax the rich! That has become a misguided progressive Left mantra. The intention is to maintain public services including health, education and income support which are core issues for progressives. But then the neoliberal indoctrination that has infested this group intervenes. They seem to think the government needs the money of those with lots of it before it can provide essential and progressive public services and fight the climate emergency. They support political parties that set as their primary macroeconomic target the achievement of a bigger fiscal surplus than the conservatives at a time when there are more than 13.5 per cent of available and willing labour resources not working (either unemployed or underemployed) and households are carrying record levels of (unsustainable) debt. And these parties keep losing elections – it is a global phenomena, most recently observed in Britain. One of the reasons we need to tax the rich is to deal with their (grossly) disproportionate impact on carbon emissions. That is one of many reasons. But you should never include among those reasons a need by government for their cash in order to facilitate spending. Any progressive who articulates that argument is just reiterating neoliberal frames....

Bill Mitchell – billy blog
Tax the rich to counter carbon emissions not to get their money
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Lars P. Syll — Knut Wicksell’s principle of just taxation

Tax away economic rents accruing from finance, monopoly and monopsony, land, and natural resources.

Lars P. Syll’s Blog
Knut Wicksell’s principle of just taxation
Lars P. Syll | Professor, Malmo University

From modern monetary theory to modern taxation theory: a debate to be had — Richard Murphy

I am aware that almost anything written on modern monetary theory appears to be contentious, and that there are those who to seek to belittle my own contribution. I should then add that Randy Wray has already written to me about this paper, welcoming it and the contribution it makes to MMT thinking. Those seeking to dismiss it because I wrote it should, then, tread warily I suggest.

That said, I am aware that I have raised difficult issues, but I hope without offending too many. Suggesting that one of MMT's major contributions is to reverse the understanding of the revenue cycle will, for some, be contentious: they will place the emphasis elsewhere. But that is not key to my argument....

Tax Research UK
From modern monetary theory to modern taxation theory: a debate to be had
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

See also

Tax justice and modern monetary theory

Robert Reich Why We Need a Wealth Tax — Robert Reich Why We Need a Wealth Tax

A wealth tax is not needed to "pay for" anything, since the US funds itself directly using currency issuance. That is, the US is a currency issuer rather than a user of currency. 

The purpose of taxation is to:

1. control for inflation 
2. discourage taxed behavior 
3. address social needs

A wealth tax would address 2 and 3. Regarding 2, the negative behavior being discouraged is rent-seeking and a wealth tax would serve to preempt rent extraction. Regarding 3,  the social need being addressed is relative equality in a liberal democracy in order to obviate falling into oligarchy as a kind of neo-feudalism based on ownership.

Robert Reich
Why We Need a Wealth Tax

Robert Reich | Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies; formerly Secretary of Labor in the Clinton administration

Zero Hedge — New Study Exposes How 21st Century Capitalists Game The US Tax System

Pass-through.

Researchers explained the evolution of the top .01%: Reagan-era tax reforms increased tax liabilities for businesses and reduced them for individuals. While this has been great for small firms over the last three decades, it made the concept of the pass-through business more appealing for large business owners to game the system....

Pass-through enables rent extraction by the "working rich."

Zidar also said these findings exemplify what is often overlooked in discussions of income inequality. There is an entire class of wealthy Americans who are gaming the tax system, by the way money flows through in human capital income.

These finds are a wake-up call for the need to reform the business tax system, the urgent need for more skilled workers and the need for better educational opportunities to empower the next generation of innovators and entrepreneurs,

“We show that if you look and decompose this income, a lot of it comes from these pass-through businesses, and that activity more closely resembles labor than the idle rich,” concludes Zidar. “Our results suggest that educating the country’s next generation of innovators may be more important than tax incentives.”

You now know how the top .01% game the tax system.

Zero Hedge
New Study Exposes How 21st Century Capitalists Game The US Tax System
Tyler Durden

Dean Baker — MMT and Taxing the Rich

Dean Baker looks at offsets.

He doesn't see "taxing the rich" as a good offset. I don't think MMT economists do either, and as far as I know, they have not pushed this proposal.

"Taxing the rich" through progressive taxation has another reason. That is, limiting the political power of wealth and reducing inequality. There are good reasons for this – social, political and economic.

Some MMT economists have recommend preemption of rent extraction first, with the residual to be addressed by taxation.

Beat the Press
MMT and Taxing the Rich
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

J. Barkley Rosser — How To Go After The US Wealthy Reagan Style

Ah yes, this is going to be another one of those ironic posts about what a big leftist liberal Ronald Reagan was compared to the current GOP gang in charge of so many of our policies, especially our tax policies. Certainlly the image of Reagan is one who cut taxes for the high income wealthy, and in general that is the case. But there were a few items going the other way, and again, compared to current policies some combination of what came out of the two major Reagan tax cuts looks downright progressive by comparison....

Econospeak
How To Go After The US Wealthy Reagan Style
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

Steve Randy Waldman — The opportunity cost of firm payouts

A lot of left-ish proposals these days, including high marginal tax rates at high incomes and bans on share buybacks, are about increasing the cost to firms of making payouts to rich shareholders, thereby reducing the opportunity cost of other uses of the money. Some of these proposals I think are solid. Some I think half-baked. [1] But the basic logic behind the proposals is missed I think by a lot of smart commentators.

Interfluidity
The opportunity cost of firm payouts
Steve Randy Waldman

Emmanuel Saez and Gabriel Zucman — How would a progressive wealth tax work? Evidence from the economics literature

Senator Elizabeth Warren recently proposed a new wealth tax on the richest Americans. Though the United States does not have a wealth tax, a number of countries around the world have or had progressive wealth taxes. In this paper, we discuss the merits and demerits of progressive wealth taxation in light of the international experience and economic theory. In short, a progressive wealth tax focused on the ultra-wealthy (households with more than $50 million in net wealth) could raise substantial revenues and the economic incidence of the tax would lie overwhelmingly on the richest families. After defining what a progressive wealth tax is, in section 2 we discuss issues of tax avoidance and evasion; in section 3 we discuss the real effects of wealth taxation on the economy; and in section 4 we make concrete proposals to administer a progressive wealth tax effectively in the United States..

How would a progressive wealth tax work? Evidence from the economics literature
Emmanuel Saez and Gabriel Zucman

Scott Baker, Lorenz Kueng, Leslie McGranahan, Brian T. Melzer — The interaction of household finances and unconventional fiscal policy

The period of low demand and low interest rates during the Great Recession has prompted economists to consider new policies to stabilise the business cycle. The ‘zero lower bound’ on nominal interest rates prevented the use of interest rate reductions to stimulate consumption and investment in many developed economies. Researchers have proposed an alternative policy tool, ‘unconventional’ fiscal policy. This is a commitment to raise consumption taxes in the future (Feldstein 2002, Hall 2011, Correia et al. 2013).

Anticipation of higher consumption taxes can incentivise intertemporal substitution in the same way as traditional monetary policy, by raising the price of future consumption relative to current consumption. Households expecting higher future taxes move consumption to the present, increasing current demand.

But unconventional fiscal policy may not be effective in practice:...

vox.eu
The interaction of household finances and unconventional fiscal policy

Scott Baker, Lorenz Kueng, Leslie McGranahan, Brian T. Melzer

Eliza Reiman — Alexandria Ocasio-Cortez slams 'far-right former governor' Scott Walker after he mischaracterizes ...

• Rep. Alexandria Ocasio-Cortez slammed former Wisconsin Gov. Scott Walker's simplification of her proposal to hike taxes on the super-rich in a tweet on Tuesday.
• Walker said he told a group of fifth graders that the policy amounted to their grandmother taking 70% of their $10 pocketmoney.
• In a viral takedown, Ocasio-Cortez pointed out that the proposed marginal tax rate increase would only apply to the wealthiest Americans.

Business Insider

Alexandria Ocasio-Cortez slams 'far-right former governor' Scott Walker after he mischaracterizes ...
Eliza Reiman

Bill Mitchell — The ‘tax the rich’ call bestows unwarranted importance on them

Bill answers the main questions about MMT and a progressive agenda to address wealth inequality.

There is no need for a currency issuer to tax to obtain the funds it issues itself.

The reasons that a currency issuer should tax excessive wealth is political, in that wealth conveys political power.

Neoliberalism differs from classical liberalism (laissez-faire) by harnessing government to promoting the interests of capital rather than reducing government involvement in the economy as a matter of principle.

Bill Mitchell – billy blog
The ‘tax the rich’ call bestows unwarranted importance on them
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Brian Beutler — Trump’s Desperation Is Exposing His Deep Ignorance [Tax Plan]

His plan for a corporate tax cut probably won't work, even with full Republican support, because he doesn't know the rules in Congress.

The New Republic
Trump’s Desperation Is Exposing His Deep Ignorance
Brian Beutler

Also

Slate
Donald Trump’s Massive Corporate Tax Cut Literally Cannot Pass Congress
Jordan Weissmann

Justin Fox — Voters Don't Like Cutting Corporate Taxes

The overall message here for elected officials would seem to be: Tread warily when cutting corporate tax rates....

Bloomberg View
Voters Don't Like Cutting Corporate Taxes
Justin Fox

Jon Perr — Trump Pushes $7 Billion Estate Tax Giveaway for His Kids

This is the standard GOP policy of repealing "the death tax."

PERRspectives
Trump Pushes $7 Billion Estate Tax Giveaway for His Kids
Jon Perr

So what else is new?

Harris&Ewing Less taxes, more jobs, US Chamber of Commerce campaign 1939

ht Raúl Ilargi Meijer atThe Automatic Earth

Peter Cooper — Two Ways to Drive Currency Acceptance through Taxes

Here are two – of many possible – approaches to driving currency acceptance. Both assume property rights are enforced by the state. The choice is presented in stark terms to illustrate a simple point. The state can:
1. Impose an exogenous tax on all non-owners.
2. Impose an exogenous tax on owners and give non-owners a basic income.…

heteconomist
Two Ways to Drive Currency Acceptance through Taxes
Peter Cooper

Jared Bernstein — We are definitely not Greece! But if we do this we could get a little bit closer…

Yes, the US can become like Greece — voluntarily, through stupidity. No, it's not choosing to default on the national debt either, and it is actually being proposed by some in the GOP.

Jared Bernstein | On the Economy

We are definitely not Greece! But if we do this we could get a little bit closer…
Jared Bernstein