{"id":48588,"date":"2020-03-28T12:50:35","date_gmt":"2020-03-28T12:50:35","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=48588"},"modified":"2020-03-28T12:50:35","modified_gmt":"2020-03-28T12:50:35","slug":"tax-justice-and-modern-monetary-theory-a-guide","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2020\/03\/28\/tax-justice-and-modern-monetary-theory-a-guide\/","title":{"rendered":"Tax justice and modern monetary theory – a guide"},"content":{"rendered":"

There seems to be the most, and quite extraordinary, lack of understanding of modern monetary theory and its interaction with tax in the tax justice world. John Christensen and Naomi Fowler of the Tax Justice Network and I were aware of this a year ago, and this blog and Taxcast<\/a> were the result. I'm sharing both again because an appreciation that tax is not just about revenue raising, if it is about that at all, is absolutely fundamental now. Nick Shaxson added to the words:<\/em><\/p>\n

Modern Monetary Theory (MMT) has gained prominence since the global financial crisis. The rising star US politician\u00a0Alexandria Ocasio-Cortez<\/a>\u00a0said recently<\/a><\/u>\u00a0we should be \u201copen\u201d to its ideas, and some mainstream economists have given it a\u00a0(qualified) endorsement<\/a><\/u>.\u00a0 For many, it offers a powerful critique of the damaging austerity policies that were implemented in the western world since the global financial crisis, and an important plank of new progressive thought.\u00a0 MMT also has\u00a0many<\/a><\/u>\u00a0critics.<\/p>\n

For the tax justice movement, however, MMT opens an important debate about the role of tax. One of the MMTers\u2019 central arguments \u2013 that governments don\u2019t need tax revenues if they want to spend money \u2013 seems to conflict with our argument that governments must tax rich corporations and crack down on tax cheating and tax havens in order to pay for roads, schools, teachers and hospitals.<\/span><\/p>\n

To illustrate this clash, take the words of UK Shadow Chancellor John McDonnell during the\u00a0Panama Papers<\/a>\u00a0tax haven scandal that\u00a0\u201cevery pound avoided in tax by the super-rich is a pound desperately needed by our National Health Service, our schools and our caring services.\u201d\u00a0<\/em>\u00a0We\u2019d strongly agree with this statement \u2013 though Bill Mitchell, a prominent MMT economist,\u00a0attacked it as\u00a0<\/a><\/u>a\u00a0\u201cdangerous and misguided narrative for progressives to engage in,\u201d<\/em>\u00a0because it\u00a0\u201cfuels damaging myths\u201d<\/em>\u00a0about how the tax and spending system works.<\/p>\n

This blog asks some big questions about MMT.\u00a0 Is it \u201dcorrect\u201c? If not, how not? But if so, is it compatible with tax justice \u2014 and could it even be useful?\u00a0 Is tax justice useful to MMT? We\u2019ve given MMT a partial endorsement and suggest there is no real conflict between MMT and tax justice \u2013 that tax justice doesn\u2019t especially\u00a0need\u00a0<\/em>MMT, but without tax justice, MMT is incomplete. You can listen to a discussion here exploring these issues in this Taxcast Extra below: (our monthly podcast, the Taxcast is available\u00a0here<\/a>)<\/p>\n