Can We Tax The Rich
Good question: Can we tax the rich? Please excuse the lack of deep thinking in the following post. It originated as an email to possibly the only reader of this blog. It kicked off a line of thought that may be an original contribution to "Modern Monetary Theory" (MMT) - one that arises out of a discipline that arises out of a theme that has been common in this blog for years. But read the rant first and be sure to read the blog that triggered it ....
https://www.nbcnews.com/think/
That's the blog I listened to this AM about how the IRS in the States was reduced to nothing by the Republicans. As we discussed, it suggests my long-standing question about whether there are built-in aspects of the system that are responsible for the "wealth gap".
I think this is an obvious one.
Bottom line, income taxes disproportionately hit wage earners - those whose taxes are deducted at source. From an MMT point of view, we need to remember that taxes are not "revenue" to fund government programs - they are basically a pressure release valve to stabilize prices, prevent inflation and protect the exchange rate. Now, if Bernie Sanders and Elizabeth Warrens of the world are right, the "rich" are not paying their "fair share". The radical question is: if a huge amount of taxes in the budget are not, in fact, collected, why not eliminate income taxes altogether? The fact is that only wage earners can be forced to pay taxes. According to MMT, the only reason people accept "fiat" currency is that they need it to pay their taxes. So the entire burden of supporting the currency falls on people who have their money confiscated at the source. If most taxes are not being collected anyway, why not see what happens if we abolish income tax? As I said, the Feds don't need the money - they can print all they need.
As I mentioned, the dreadful "deficit" run by the government is actually saving in the private sector. Who owns this debt? Well, it's not your average citizen who has generally given up ever being free of debt.
So if all money is basically "printed" where does the money wind up? As a sector, the lower and middle class are "underwater" - they are not part of the creditors behind the deficit.
I wind up with a picture of the Federal Government printing money that flows more or less directly into the pockets of the rich. The idea that we can correct this by tinkering with the tax system is, to put it mildly, a hoax.
Government spending is in terms of "IOUs", which say, here is $1 which means the government owes you $1. Why would anyone accept that as payment? Well, because the government will force you at gunpoint to give back some of those dollars in taxes. Except if you are rich. If you are rich, you can build up an ocean of IOU's and let the huddled masses pay to cancel them out of the system.
The observation that the wealth gap is wide and getting wider is simply that the rich are piling up the IOU's (money) created by the government. The official reason for taxes, accepted by almost everyone, is to "fund" the government. That's simply a lie based on the unpopularity of courses in basic accounting. The massive savings reflected by the "deficit" are a symptom of the fact that the rich have problems spending all the money printed for them and must save some of it. At interest of course. No problem, the government can "print" any amount of currency to "service" that debt. Who gets that currency?
One last thought. Flat taxes such as GST and the Carbon tax are opposed by the "left" since they are "regressive". Only income tax is "progressive", hitting the rich more than the poor. But this is true only in theory. In fact, we can see that the current system syphons off government currency to the people who already have most of it. To cite just one wild alternative, suppose that the government pays all medical expenses and "pays for it" with a head tax. At first glance, that's "regressive", but the rich have only one body each. Another idea from MMT is to tax land, just as it already is at the municipal level. The land is hard to hide. For this to work, the land tax should be collected "at gunpoint" like income tax, then granted back to the municipalities (who can't print money to cover their expenses). That would be a bit more "progressive", but the key idea is to make the tax efficiently; collectible. Remember, the goal is to stabilize prices and protect the currency - a goal that even the rich should get behind.
This would put an army of tax "experts" and insurance companies out of business, but hey, you gotta break some eggs, right?
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