I admit I do not agree with the Tax Justice Network simplistic view that tax funds government spending (because it doesn't) but that apart this is well worth watching:
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Okay so their thing about taxes funding stuff is rhetoric, but surely large funding flows out of an economy is an imbalance which makes governments and central banks alter monetary policy to balance out the amount of money in the economy?
Surely those monetery policy changes might be deleterious to the economy?
The funding flows from the government because that is where money comes from. It is spent into the economy and this spending will gradually get taxed to prevent inflation. Correct me if I am wrong.
Thank you. Thank you thankyou. I appreciate the subtle point you are making and thank heaven that you are brave enough to make it. Tax revenue is not the only source of government spending. It is so obvious, but needs to be said by someone of your calibre.
I summarise it as G = T + ∆B + ∆M
where G = government spending
T = net tax cash receipts after tax gaps
∆B = the change in borrowing
∆M = the change in government created money
To argue that T = G (and in that order) is, then, absurd
I was wondering whether
G – T = dB + dM
Might be a better way of stating your equation (which helped me a lot with my money understanding btw)
This way it becomes clear (to me at least) that the borrow plus “print” correlates to the gap between government spend and tax revenue.
It also separates the function of tax neatly away from being a source of government income. Now it is seen to cancel out T of government spend. The remainder must be made up by borrowing or “printing”.
Just my two ha’penneth worth 🙂
I like the idea
I think it well worth adding to the armoury
Thanks
A little late on the response, so sorry about that, but your comment has made my evening Richard.
Many thanks and very glad to be able to (finally) contribute 😀
Thank you!