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MMT and Taxes

Moderate Right

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Serious non-debate question here for the MMT'rs. I have never denied that MMT makes sense short term (just not long term and no, you cannot string a bunch of short terms together) but, I am curious as to what you self proclaimed experts think would be the best tax policy if you were president and had a supermajority in both the House and the Senate and could basically do whatever you wanted. What would your tax policy be and would it be different in down economies as well as growing economies? I'm not asking for debate purposes, I'm just genuinely curious as to your thoughts on the subject.
 

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Taxes should be looked at as tool to regulate the economy. When inflation starts moving up, you tax the middle class and reduce demand. When demand is weak you can lower taxes on the lower and middle classes. When there is not enough capital you can lower taxes on he upper class. When capital markets are inflated or the wealthy have too much political influence you can raise their taxes.

I think these concepts are true in any economic model. The balance between supply and demand is skewed one way or another. You have to decide which way it is skewed before making policy decisions.

I think the only thing that mmt brings to this is that taxes need not "fund" the government. Deciding that "revenue" and outlays must be as close as possible then adds a distributive meaning. Now higher taxes on the upper class means that you can lower taxes on the lower classes thus increasing demand and vice versa for supply without a change in deficit due to differences in those groups marginal propensity to consume.
 

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Taxes should be looked at as tool to regulate the economy. When inflation starts moving up, you tax the middle class and reduce demand. When demand is weak you can lower taxes on the lower and middle classes. When there is not enough capital you can lower taxes on he upper class. When capital markets are inflated or the wealthy have too much political influence you can raise their taxes.

I think these concepts are true in any economic model. The balance between supply and demand is skewed one way or another. You have to decide which way it is skewed before making policy decisions.

I think the only thing that mmt brings to this is that taxes need not "fund" the government. Deciding that "revenue" and outlays must be as close as possible then adds a distributive meaning. Now higher taxes on the upper class means that you can lower taxes on the lower classes thus increasing demand and vice versa for supply without a change in deficit due to differences in those groups marginal propensity to consume.

How could you make that work in reality, other than constantly changing the tax laws every time the economy changed? Is there something you could do which would not require constant changing?
 

pdog

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How could you make that work in reality, other than constantly changing the tax laws every time the economy changed? Is there something you could do which would not require constant changing?

Our tax brackets and laws already change all the time. What I'm suggesting is to adjust them based on economic conditions rather than whatever baseless ideal happens to be held by the ruling party. Laws could even be written as equations based on economic variables so that taxes change without changing the laws.
 

JP Hochbaum

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This is from a fellow libertarian who understands that describing how things work aint such a bad thing.

"To summarize, the most important things I took away from this exercise are:

In a free floating irredeemable fiat currency system the government cannot default on its debts
In such a fiat money system the government creates money by spending and destroys it by taxing
Taxes drive money
Government bonds are basically just like savings accounts at the central bank
Private banks lend first, then obtain reserves
Fractional reserve lending is naturally constrained by the creditworthiness of borrowers
In my opinion MMT helps us explain and understand the current fiat money system much better than conventional or Austrian economics. This is coming from an Anarcho-Capitalist who has read books like Mises’ Human Action, Theory of Money and Credit, Socialism, and many others, so don’t think I say this lightly!

Even if we find moral or economic flaws in a system, it is better for us to understand how it actually “works” right now in order to make policy recommendations down the road. I believe MMT offers a lot of insight on that front and I will provide some contemporary and relevant examples in subsequent posts."

https://beinglibertarian.com/mmt/
 

JP Hochbaum

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Serious non-debate question here for the MMT'rs. I have never denied that MMT makes sense short term (just not long term and no, you cannot string a bunch of short terms together) but, I am curious as to what you self proclaimed experts think would be the best tax policy if you were president and had a supermajority in both the House and the Senate and could basically do whatever you wanted. What would your tax policy be and would it be different in down economies as well as growing economies? I'm not asking for debate purposes, I'm just genuinely curious as to your thoughts on the subject.

Mine would be a land value tax. Fastest direct way to tax the entire country and most difficult to dodge.
 

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Mine would be a land value tax. Fastest direct way to tax the entire country and most difficult to dodge.

Thanks for answering. If I were one of you guys that is what I would have said but I really wasn't sure what you would say. I was genuinely curious since MMT seems to claim that technically we don't use taxes collected to pay the country's bills but we still need to collect taxes anyway. I believe that is the way the country started out by taxing just land owners. I knew it would have to be some form of taxing the richer and not so much the poorer (which I'm not against in principle as long as most people would pay something), so that's not really a bad idea, even if you are not an MMT'r. However, like anything, there would be some pitfalls. One would be it is much easier for the IRS to collect money on a regular monthly basis from businesses who deduct those taxes from paychecks than to send out tax bills probably just once per year. Two, there could be a lot of cases where you own a lot of land or property (the elderly and farmers for example) but do not make enough income where you could afford to pay the taxes on the property value.
 
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austrianecon

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Our tax brackets and laws already change all the time. What I'm suggesting is to adjust them based on economic conditions rather than whatever baseless ideal happens to be held by the ruling party. Laws could even be written as equations based on economic variables so that taxes change without changing the laws.

This is a fallacy. Tax bracket and laws do change but they are NOT fluid. It takes months to take affect and sometimes don't even get passed and are actually targeted against a specific group of people. For a model of fluid taxes to take place you'd have to have a policy of preventive instead of reactionary. That means Government has to be able to model with an accuracy of 100% all the time. We know this is not possible.
 

austrianecon

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This is from a fellow libertarian who understands that describing how things work aint such a bad thing.

"To summarize, the most important things I took away from this exercise are:

In a free floating irredeemable fiat currency system the government cannot default on its debts
In such a fiat money system the government creates money by spending and destroys it by taxing
Taxes drive money
Government bonds are basically just like savings accounts at the central bank
Private banks lend first, then obtain reserves
Fractional reserve lending is naturally constrained by the creditworthiness of borrowers
In my opinion MMT helps us explain and understand the current fiat money system much better than conventional or Austrian economics. This is coming from an Anarcho-Capitalist who has read books like Mises’ Human Action, Theory of Money and Credit, Socialism, and many others, so don’t think I say this lightly!

Even if we find moral or economic flaws in a system, it is better for us to understand how it actually “works” right now in order to make policy recommendations down the road. I believe MMT offers a lot of insight on that front and I will provide some contemporary and relevant examples in subsequent posts."

https://beinglibertarian.com/mmt/

Nima Mahdjour is trying to get attention. Two years ago he claimed bitcoin worked. He's about as Anarcho-Capitalist as my Brother is a Nazi or I am a Green Party member.
 

austrianecon

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Mine would be a land value tax. Fastest direct way to tax the entire country and most difficult to dodge.

JP, LVT is a scam. As a person who grew up in PA where LVT is done in many towns and cities (about 20).. Green spaces wouldn't happen in a city or a town because since a Green space is undeveloped yet taxed and the poor actually pay more in taxes (look at Harrisburg for example). Pittsburgh which had the LVT until mid 2000s found in study after study it did that wealth doesn't come from land but rather the structures on the land. LVT is actually passed onto renters as well. It's actually a tax that targets the poor.
 

pdog

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This is a fallacy. Tax bracket and laws do change but they are NOT fluid. It takes months to take affect and sometimes don't even get passed and are actually targeted against a specific group of people. For a model of fluid taxes to take place you'd have to have a policy of preventive instead of reactionary. That means Government has to be able to model with an accuracy of 100% all the time. We know this is not possible.

Which fallicy is it?

Fo starters, what I said is true. Tax laws and brackets change all the time. Looking at a graph you'll see that they change at least every ten years so making such changes at say 5 years shouldn't be a stretch. Plus that's to change the law themselves. We could simply pass laws that govern the change rather that the final rates. Inputs such as economic disparity, inflation, etc could control the rates. For example he law could state that if inflation is x, then they tax rate for the middle class is x and the tax for the upper class is 1-x (inversely related). These are simplified examples, but coming up with more robust examples is hardly difficult from a mathematical or economic sense.

It is reactionary, but so is our current system. The difference is that the reaction is made under high political tension to install some new idealology, rather than committing to a principle and sticking to it thru the business cycle. Frankly if you want to propose something that prevents the business cycle than be my guest. You'd be a gifted economist if you could.
 

austrianecon

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Which fallicy is it?

Fo starters, what I said is true. Tax laws and brackets change all the time. Looking at a graph you'll see that they change at least every ten years so making such changes at say 5 years shouldn't be a stretch. Plus that's to change the law themselves. We could simply pass laws that govern the change rather that the final rates. Inputs such as economic disparity, inflation, etc could control the rates. For example he law could state that if inflation is x, then they tax rate for the middle class is x and the tax for the upper class is 1-x (inversely related). These are simplified examples, but coming up with more robust examples is hardly difficult from a mathematical or economic sense.

It is reactionary, but so is our current system. The difference is that the reaction is made under high political tension to install some new idealology, rather than committing to a principle and sticking to it thru the business cycle. Frankly if you want to propose something that prevents the business cycle than be my guest. You'd be a gifted economist if you could.

So your reply refutes nothing I said? 5-10 year periods do not fix issues in the current. You are not going to get a floating tax policy out of the US Government, nobody, even Democrats will not vote for that. The political reality is a floating tax rate is dead in the water before you even brought it up. I always point this out to MMTers that think taxes can be used to mop up inflation.
 

pdog

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So your reply refutes nothing I said? 5-10 year periods do not fix issues in the current. You are not going to get a floating tax policy out of the US Government, nobody, even Democrats will not vote for that. The political reality is a floating tax rate is dead in the water before you even brought it up. I always point this out to MMTers that think taxes can be used to mop up inflation.

The op eliminated an current "political reality" when he offered "you could do whatever you wanted". Further you're putting the cart before the horse. "Political reality" is often driven by ignorance. You can change that reality by fixing the ignorance. The status quo "f-it, you can't change it" argument doesn't fly with me. So lets forget for a second what may or may be possible when all the other screwed up components of our system are gumming up the works and work in the vacuum that the OP has offered. Does what I said make sense in that vacuum? Does dropping a feather next to a grape disprove gravity because we can't easily create the scenario where the feather has no wind resistance?
 

austrianecon

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The op eliminated an current "political reality" when he offered "you could do whatever you wanted". Further you're putting the cart before the horse. "Political reality" is often driven by ignorance. You can change that reality by fixing the ignorance. The status quo "f-it, you can't change it" argument doesn't fly with me. So lets forget for a second what may or may be possible when all the other screwed up components of our system are gumming up the works and work in the vacuum that the OP has offered. Does what I said make sense in that vacuum? Does dropping a feather next to a grape disprove gravity because we can't easily create the scenario where the feather has no wind resistance?

1) So let me get this straight, Ignore the rule of law to get what you want because you know it's the only way you can do it?

2) Political reality is not driven by ignorance, but by law. Such as Constitutional law.

3) I am not saying, "**** it". I am telling you the political and economic reality. A floating tax rate is not in reality. Businesses plan long term and floating tax is not long term so businesses will be less inclined to make investment or hire people as there is still an unknown input (tax rates).

4) You are talking about floating tax rates on the middle class. Any asshat in Congress who votes for that will be voted out of office the next election cycle because a floating tax to curb inflation actually is a DOUBLE tax on middle class as they would be paying higher costs for items and higher taxes due to that higher cost. You'd wipe out the middle class in one fell swoop.
 

pdog

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1) So let me get this straight, Ignore the rule of law to get what you want because you know it's the only way you can do it?
Thats a strawman and you know it. We're talking about changing laws and the OP gave carte blanche in that regard. If you don't like it, start your own thread.

2) Political reality is not driven by ignorance, but by law. Such as Constitutional law.
a) You're wrong, b) when did my suggestions violate constitutional law

3) I am not saying, "**** it". I am telling you the political and economic reality. A floating tax rate is not in reality. Businesses plan long term and floating tax is not long term so businesses will be less inclined to make investment or hire people as there is still an unknown input (tax rates).
I'm telling you that "political reality" changes with what people believe. Rounding up one ethnicity and sending them to internment camps probably isn't "political reality" today, but tell that to the Japanese.

Apparently you missed the part where I said I don't agree with taxing businesses.

4) You are talking about floating tax rates on the middle class. Any asshat in Congress who votes for that will be voted out of office the next election cycle because a floating tax to curb inflation actually is a DOUBLE tax on middle class as they would be paying higher costs for items and higher taxes due to that higher cost. You'd wipe out the middle class in one fell swoop.
I thought you were better than this. You're laying on the hyperbole pretty thick. I'm wiping out the middle class now? Did you forget that the middle class has a lot of debt that inflation helps them with? Did you you not realize that what I'm talking about would help them way more than small pain of the variability that would come much later?

You've had your turn to put your crap spin on this, now here's mine:
We would create a variable tax system based on income disparity, inflation, etc that would first increase taxes on the wealthy to restore economic disparity to the much healthier levels of 1980. For the sake of full disclosure, ONCE THAT OCCURS, everybody's taxes would very slightly. Our goal would be to MAINTAIN that new equilibrium, not slip into communism.

See how that works? I even tapped into our fears of communism :p.
 

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Thats a strawman and you know it. We're talking about changing laws and the OP gave carte blanche in that regard. If you don't like it, start your own thread.


a) You're wrong, b) when did my suggestions violate constitutional law


I'm telling you that "political reality" changes with what people believe. Rounding up one ethnicity and sending them to internment camps probably isn't "political reality" today, but tell that to the Japanese.

Apparently you missed the part where I said I don't agree with taxing businesses.


I thought you were better than this. You're laying on the hyperbole pretty thick. I'm wiping out the middle class now? Did you forget that the middle class has a lot of debt that inflation helps them with? Did you you not realize that what I'm talking about would help them way more than small pain of the variability that would come much later?

You've had your turn to put your crap spin on this, now here's mine:
We would create a variable tax system based on income disparity, inflation, etc that would first increase taxes on the wealthy to restore economic disparity to the much healthier levels of 1980. For the sake of full disclosure, ONCE THAT OCCURS, everybody's taxes would very slightly. Our goal would be to MAINTAIN that new equilibrium, not slip into communism.

See how that works? I even tapped into our fears of communism :p.

But, is an income tax really what at MMT'r would want? JPH, an MMT'r, talked about having some form of land or property tax instead of an income tax.
 

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But, is an income tax really what at MMT'r would want? JPH, an MMT'r, talked about having some form of land or property tax instead of an income tax.
In the current context, that's what I want. I don't think MMT specifically addresses how to fix other 'issues' nor does it necessarily identify issues. The only things I can think of that it does say about taxes is that, by taxing, you inherently give a fiat currency some of it's value (because you have to pay taxes) and that taxes remove money from the economy. So in a perfect world you tax as little as possible.

But our world is not perfect. In our system we have all these other variables, including the influence that money has on our political system. So by allowing wealth to pool you create an imbalance in democracy. The best fix would be to remove the influence of money, but the second option is to adjust the imbalance thru taxation.

Further "tax" is a general term. The reality is that taxation has a different effect on our economy depending on who you tax. Taxes on the lower to middle classes would have almost been guaranteed to be spend into the economy. However, taxes on the wealthy are different. They spend only a fraction of their income, and the effect on the economy by taxing them (at least in terms of demand) is directly related to that fraction. This is called marginal propensity to consume. Of course that marginal propensity to consume could also be credited with creating investment dollars - what they don't spend they invest. So lower taxes on the wealthy might increase supply IF that is what the economy needs. MMT experts like Stephanie Kelton do acknowledge these things, but they don't spend too much time on it since it might distract from their overall message.

I have other non-MMT reasons for an income tax. Income disparity while maybe not an issue if we could create whatever currency we need to pay people a solid wage, why NOT let other metrics like disparity control that. Maybe we can spend whatever defict dollar we need to, but why do that to support inflated capital markets? The wage gap in the 80s between ceo in workers was 40x, now it's 400x? For what reason did we allow that to happen? To me allowing wealth to pool like that is just asking for trouble. You can't keep allowing one class to keep setting records for the longest yacht when another is having trouble feeding itself.
 

JohnfrmClevelan

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1) So let me get this straight, Ignore the rule of law to get what you want because you know it's the only way you can do it?

2) Political reality is not driven by ignorance, but by law. Such as Constitutional law.

3) I am not saying, "**** it". I am telling you the political and economic reality. A floating tax rate is not in reality. Businesses plan long term and floating tax is not long term so businesses will be less inclined to make investment or hire people as there is still an unknown input (tax rates).

4) You are talking about floating tax rates on the middle class. Any asshat in Congress who votes for that will be voted out of office the next election cycle because a floating tax to curb inflation actually is a DOUBLE tax on middle class as they would be paying higher costs for items and higher taxes due to that higher cost. You'd wipe out the middle class in one fell swoop.

Per MMT, you don't need to raise taxes at all unless you are experiencing demand-pull inflation. So you guys are arguing details about a point at the extreme end of the curve that we are not likely to reach.
 

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Per MMT, you don't need to raise taxes at all unless you are experiencing demand-pull inflation. So you guys are arguing details about a point at the extreme end of the curve that we are not likely to reach.

In a perfect world I agree, John. But even Kelton covered how taxes can be used to control economic and power disparity.
 

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I assume this is a US site and I'm afraid I do not know US tax system or whether they are progressive or not. A progressive tax system will likely ameliorate any inflation risk - this is one way taxes control inflation. Taxes are just the thermostat on the economy.

Raising and lowering taxes is used as a simplification and a metaphor for the most part. Other ways to address inflation are income policies and capital controls. It however depends on the source of inflation what approach may be best.
 

MTAtech

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Taxes should be looked at as tool to regulate the economy. When inflation starts moving up, you tax the middle class and reduce demand. When demand is weak you can lower taxes on the lower and middle classes. When there is not enough capital you can lower taxes on he upper class. When capital markets are inflated or the wealthy have too much political influence you can raise their taxes.

I think these concepts are true in any economic model. The balance between supply and demand is skewed one way or another. You have to decide which way it is skewed before making policy decisions.

I think the only thing that mmt brings to this is that taxes need not "fund" the government. Deciding that "revenue" and outlays must be as close as possible then adds a distributive meaning. Now higher taxes on the upper class means that you can lower taxes on the lower classes thus increasing demand and vice versa for supply without a change in deficit due to differences in those groups marginal propensity to consume.

There are several problems with that. The first the lag. It takes time to enact tax law. Then, we pay taxes on April 15th of the following year. It's far more effective and fast to use monetary policy to regulate recession and inflation. It's also left up to experts, instead of Congress, who typically have political favors that will skew the policy.
 

MTAtech

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Serious non-debate question here for the MMT'rs. I have never denied that MMT makes sense short term (just not long term and no, you cannot string a bunch of short terms together) but, I am curious as to what you self proclaimed experts think would be the best tax policy if you were president and had a supermajority in both the House and the Senate and could basically do whatever you wanted. What would your tax policy be and would it be different in down economies as well as growing economies? I'm not asking for debate purposes, I'm just genuinely curious as to your thoughts on the subject.
The Diamond-Saez proposition make the point that the optimal top tax rate is the one that maximizes revenue, just like the price of candy bars should be set to maximize revenue.
 

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Tax wealth not income. No corporate, no tax at all on business. Tax the owners, stock holders at a commensurate rate. No tax free investments, including pensions and muni bonds. Everything gets taxed. Uniform sales tax nationwide so online taxing can be efficient. Everyone pays some federal taxes.
 
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