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Wally Grigo's avatar

Am I missing something here? Stephanie's 1998 groundbreaking paper showed that federal "Tax revenue" is an oxymoron. Why? Since the gov't runs deficits ($28.5 trillion so far), any tax receipts collected by the IRS get deposited in the Treasury's general account at the Federal Reserve, get credited against the spending that has already occurred, and, to keep the books straight, the credits offset the debits and the money simply disappears with a few computer keystrokes! There is no IRS piggy bank! If I'm understanding Stephanie's argument, this is why she argues so strenuously against "pay-fors." Federal taxes can't possibly pay for anything, although it's certainly true that state and local taxes can be construed as true revenue. Why? Because those gov'ts don't issue the currency! They actually need the money.

So why tax the wealthy? Because they have a high propensity to save, as Stephanie has argued, their wealth probably doesn't add much to inflation (the rich already have all the toilet paper and toothpaste that they need). OK, so the price of yachts and summer homes on Martha's Vineyard might go up, but who cares? So curbing inflation is not the reason to tax the wealthy, and we've already seen that we can't spend their tax "revenue" because it doesn't exist. So the absolute and moral reason to tax the rich is to limit their economic/political power. The key insight here is that we don't need taxes from the rich to invest in the programs that will benefit our citizens.

A final thought. Where do the rich suppose their financial wealth came from? US dollars don't grow on trees. And private banks have a nasty habit of wanting their loans to be repaid in full. So if you analyze the gross financial wealth denominated in US dollars around the world, you'll find that it tracks quite closely to the so-called US "national debt." The rich are wealthy precisely because the US gov't doesn't care about collecting as much tax as it spends in any given year. As Stephanie is fond of saying, the gov't's red ink is our black ink!

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tom abeles's avatar

It's not MMT, it's not "envy". It is the same issue that countries are facing when the loopholes allow money to flow to tax advantaged sites, or to be harbored thru lobbied tax avoidance laws that shift the public's responsibilities onto those who don't have a level playing field to lobby for their own interests. It is related to what happens to countries with dollarized debt and are forced to privatize public assets (c.f. the saga of the economic hit men) or the outcome from the housing collapse of '08)

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