It really is time the world understood tax

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I am seeing quite a lot of criticism of Biden's tax plan for the US, from right across the political spectrum.

MMT does not like it because it argues that tax is not required to fund government programmes, which is true, but misses the broader point I make below.

I do not like it because it links the spend on the plan to the money raised, and that I suggest is wrong. If need is real then spend must happen, and tax revenue will flow from it. Getting the ordering right is important, and Biden gets this wrong.

The Right do not like it because it taxes wealth, and that in their view is wrong, although there is no evidence to suggest that the levels of tax on wealth do impact real levels of actual investment.

And those who will pay more tax clearly do not like it.

But let me make the point very clear that in my opinion there are six reasons to tax:

1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;

2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate;

3) To redistribute income and wealth;

4) To reprice goods and services;

5) To raise democratic representation - people who pay tax vote;

6) To reorganise the economy i.e. fiscal policy.

I stress, these are not choices. They are true right across tax. All tax is subject to these criteria.

So, tax does recover spend, and does not fund it. MMT is right.

But tax also does control inflation.

And it does redistribute wealth, and reorganise the economy. And so on.

These are not alternatives. Taxes work in this way, simultaneously.

My point, then, is to suggest that the criticism of the plan has to be on these broad criteria, and not any narrow one if it is to be appropriate.

Biden has some of this right, but not all. Most opponents do not even get the issue.

It really is time the world understood tax.