Thew front covers of the Times and Telegraph this morning both refer to the forthcoming capital gains tax review that I have already noted today:
If clicked enough times the images should be big enough to read.
What is very clear is that the idea of taxing wealth in any form is not popular in some parts of the political spectrum and yet, as I have shown, wealth increases are very heavily undertaxed.
The question here is an ethical one. The issue is whether those with the greatest ability to pay should pay most?
And it is a question about whether inequality matters to us?
And it is also a question on equality of opportunity, since concentrated capital ownership undoubtedly denies that chance.
But it's also an economic question, because capital gains rarely give rise to additional employment-generating spending, whereas the spending of those with lower incomes does. So, shouldn't we be taxing wealth more when there is a shortage of demand in the economy and reducing tax on those with the lowest incomes has greatest chance of increasing that demand, and so employment?
These are questions that should be rationally debated. They should not be made into fear-inducing headlines.
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Looks like there could be some more converts to MMT coming soon.
Almost everyone, in Europe and N America at least, has probably played the game of Monopoly. I actually think it is a very good model of capitalism with essentially no state or regulation. Everyone knows wealth accumulates and before too long whoever is putting up their swanky new hotels on Park Lane etc discovers that none of the potential guests can afford to stay in them any more. So the game ends abruptly in what in real life would be a Marxist revolution. I am sure that many folk have kept the game going, as we did as kids, by either gifts of cash from the bank or a special tax on the wealthiest players. That is not a difficult lesson and if the object is to keep the game going then that actually works for all the players whether they are rich or poor.
Do the rich just want to count the zeros on their bank statement or is it that they like the buzz from the deal, winning, and the power? If the latter then the fact that 90% of the winnings get taxed as opposed to 30% does not actually matter. Winning the million pound contract is still winning the contract. The evidence from the 1970s is that no tax bill ever stopped somebody from building their business or whatever it was they liked doing.
Monopoly also gets money creation – if the bank runs out of money the banker just writes IOUs on bits of paper and on you go.
I’d be surprised if the Tories brought in the kind of changes you would like, and I think Labour have already indicated that they won’t be pressing for them in opposition.
But it is your argument in your penultimate para that interests me. It interests me partly because it doesn’t seem very MMT. To me at least it’s more of the tax and spend paradigm, than a spend and tax one.
But what interests me more is your rationale for taxing the wealthy, rather than taxing those on lower incomes. It is that, not taking money from people on lower incomes, stimulates demand, whereas not taking money from the wealthy does not. Or to put it in a rather simpler way and without double negatives, taxing those on lower incomes suppresses demand, whereas taxing the wealthy does not.
I’m sure this is right, and taxing the wealthy sounds like good social democratic practice too. But when it comes to MMT, is this argument not also a bit worrying?
You don’t need me to tell you that in MMT the purpose of tax is to regulate (ie suppress) demand, and this is because excess demand leads to inflation. The idea is that if money isn’t destroyed through tax, there will be too much money, and too much money chasing too few goods will inevitably generate inflation.
But if you need to suppress demand (and surely you must) and taxing the wealthy won’t do this, whereas taxing the less well off will, who are you going to tax?
It looks as if to tax the wealthy would pointless, and you would instead have to tax those on lower incomes. But of course this is exactly the opposite of what you propose, and exactly the opposite to what I would want to propose. So our shared social democratic instincts seem to be banging right up against MMT and not in a good way.
Okay I accept other imperatives can be brought into play too. No doubt we would both want that. But it all makes me rather uneasy. It’s clear though, I think, that there is nothing inherently green or social democratic about MMT. Indeed its own internal logic seems it have the potential to lead in very much the opposite direction.
I think you need to read this
MMT wants to withdraw money from the economy
It does not say how
It’s true that a goal is to create room for government spending – but that is only a constraint at full employment
You see to have forgotten that
Every other time social policy comes into play as a higher priority because there is no demand constraint https://www.cambridge.org/core/journals/social-policy-and-society/article/modern-monetary-theory-and-the-changing-role-of-tax-in-society/B7A8B0C7C80C8F7E38D20BE4F5099C83
You’re doing an argument in extremist inappropriately because so far we’ve never seen that situation arise