{"id":46462,"date":"2019-10-15T08:13:24","date_gmt":"2019-10-15T07:13:24","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=46462"},"modified":"2019-10-15T08:14:08","modified_gmt":"2019-10-15T07:14:08","slug":"randy-wray-on-modern-monetary-theory-and-tax","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/10\/15\/randy-wray-on-modern-monetary-theory-and-tax\/","title":{"rendered":"Randy Wray on modern monetary theory and tax"},"content":{"rendered":"

I have already mentioned a piece I had written for the Real World Economic Review on modern monetary theory and taxation<\/a> recently. Now Randy Wray, one of the leading MMT thinkers has reviewed the price on New Economic Perspectives<\/a>. I quote at length, as I think that's fair in this case:<\/p>\n

[T]his issue of\u00a0rwer<\/strong>\u00a0contains what I believe to be a first\u2013an article that tries to fill a perceived gap. Some months ago Richard Murphy had written to me arguing that MMT has not gone sufficiently in depth on the issue of taxes. I thought that was a strange accusation\u2013since most critics argue we talk too much about taxes (as in driving the currency and fighting inflation). Further, I had added a chapter to the second edition of my\u00a0Modern Money Primer\u00a0to discuss taxes in more detail\u2013good taxes and bad taxes. But what Murphy meant was taxes at the micro level. I responded that I accept the Musgrave&Musgrave approach (which I had studied\u2013and taught; it is\u00a0THE\u00a0source on public finance). He responded that that is not sufficient. I remained puzzled.<\/em><\/p>\n

But his piece in\u00a0rwer<\/strong>, \u201cTax and modern monetary theory\u201d, clarifies his point. And, I must add, in a reasonably respectful manner. Again, this is something we rarely see from critics\u2013who call us fascists and communists (without I suppose recognizing that there\u2019s an ocean of difference between the two\u2013but, then again, the critics aren\u2019t scientists). Richard argues that \u201ccash paid in tax is a residual figure arising from a plethora of decisions on tax bases, reliefs and allowances, as well as tax gaps that result from non-compliant taxpayer behavior\u201d. Recognizing MMT\u2019s argument (based on Ruml) that taxes are not really for revenue purposes, he argues for seeing \u201cuse of tax [instead] as a critical instrument in economic and social policy management\u201d. I agree.<\/em><\/p>\n

My own contribution to the\u00a0rwer<\/strong>\u00a0issue actually addresses his first point, that taxes are a residual\u2013what I call (following Keynesian theory) a leakage. They cannot \u201cpay for\u201d anything since the spending must come first. I argue that it is truly amazing that our Post Keynesian critics adopt the leakages and injections approach, recognizing that saving (a leakage) cannot finance investment (an injection) because injections logically come before leakages, but then drop it when they discuss government spending and taxes. The same logic\u00a0MUST<\/strong>\u00a0be true of government spending (injection) and taxes (leakage). But they all get \u201cdazed and confused\u201d when it comes to government. They simply abandon any understanding of basic macro theory and jump on the \u201ctaxes pay for government spending\u201d bandwagon. Truly bizarre and rather embarrassing too.<\/em><\/p>\n

In many places I have also discussed the use of taxes for behavioral management (sin taxes, and the like). But Murphy\u2019s article goes deeper than I have in the past. I recommend reading it, and I\u2019m going to incorporate some of his arguments in my future work. I want to be clear\u2013I\u2019m not embracing everything in his article and I\u2019m not convinced that his insights lead to an entirely different (and implicitly presumed to be better?) paradigm, modern taxation theory (MTT). But I\u2019m glad he tried to make a positive contribution.<\/em><\/p><\/blockquote>\n

I most certainly tried.<\/p>\n","protected":false},"excerpt":{"rendered":"

I have already mentioned a piece I had written for the Real World Economic Review on modern monetary theory and taxation recently. Now Randy Wray,
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,174],"tags":[],"class_list":["post-46462","post","type-post","status-publish","format-standard","hentry","category-economics","category-modern-monetary-theory"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/46462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=46462"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/46462\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=46462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=46462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=46462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}