The ‘tax the rich’ call bestows unwarranted importance on them

It is Wednesday, so only a few snippets only today, while I am working on six lectures I have to give in Helsinki over the next two weeks. The first of those lectures will be a public event. And looking at the weather I am about to undergo around a 45 degree Celsius turnaround from where I am today in Australia to where I will be next week! That is what happens when you go to Finland in the early part of the year. Anyway, here are some items of interest I hope.

Our Green European Journal Article

In case you haven’t seen it, Thomas Fazi and myself have an article out last week (February 16, 2018) in the Green European Journal entitled – Tax havens must be closed, but not for the reasons you think

The article summarises arguments I have made in various blogs (see below) – which can be distilled into these summary insights:

1. Currency-issuing governments are not like households, who are financially constrained and have to ‘fund’ their spending via income, borrowing, prior savings or asset sales.

2. The progressive reaction to the release of the Paradise Papers told us that most progressives still do not understand Point 1. They think the government needs to raise taxes to reduce its reliance on debt while providing public services via expenditure.

3. “A consequence of the fiat system is that governments that issue their own currencies no longer have to ‘fund’ their spending.”

4. “currency-issuing governments such as those of Australia, Britain, Japan and the US can never ‘run out of money’ or become insolvent.”

5. “Do we need the rich’s money?” No.

6. “So should we close down tax havens? Yes!”

Why? The reasons “largely have to do with social justice, inequality and the distribution of political power”.

For more information, please read the article (if you are interested).

The point generalises. Last Friday, I gave a talk at the New International Bookshop in Melbourne about our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017).

There was a good audience and during the question time the issue of ‘taxing the rich’ came up. A very oft-repeated ‘progressive’ narrative.

The response I gave was that just as Ayn Rand claimed in Atlas Shrugged that the workers were parasites and relied on the productive skill and zeal of the bosses, the ‘tax the rich’ narrative perpetuates the view that without the rich folks in our society we can have nothing worthwhile.

Which is plainly false.

I said that there are good reasons for decreasing the spending capacity of the rich (via taxes etc) but none of those reasons relate to whether the government has the financial capacity to provide first-class public services to the poor (or the rest of us).

Modern Monetary Theory (MMT) tells us that a currency-issuing government can provide these services if it has the political will.

If the economy is at full capacity then such a government has to divert resources from other uses into a specific service that it wishes to expand.

It would do that via taxation. But the taxation is freeing up real resources to be used in the desired way by depriving the non-government sector of their use.

It is not giving the government extra ‘money’ which enables it to spend.

More generally, ‘taxing the rich’ is supported by a progressive agenda because it reduces the ‘power’ of the rich to exploit the political process for their own purposes.

I have written about this issue previously (among other blog posts on the topic):

1. What matters about the Paradise Papers (November 13, 2017)

2. Solving tax avoidance will not cure the Eurozone of stagnation (December 15, 2014).

3. Off-shore tax havens – be sure we define the issues correctly (July 23, 2012)

This is what I am listening to at present while I work …

I was reminded by a reader (thanks N.) of this great album – Pieces of Man – which was released in 1971. I haven’t listened to it for a long time.

It was the second album from the late poet, musician and author – Gilbert Scott-Heron – who was active in the 1970s and 1980s.

He brought soulful music together with social and political commentary – a powerful mix. He called himself a “bluesologist”.

He had troubles in his life but the music he left is of exceptional value.

Here is an interesting obituary (May 28, 2011) in the New York Times – Gil Scott-Heron, Voice of Black Protest Culture, Dies at 62.

This track featured the great Jazz double bass player Ron Carter and pianist Brian Jackson, who cowrote the song about the problems of unemployment.

The lyrics are:

Jacky jigsaw pieces
Tossed about the room
I saw my grandma sweepin’
With her old straw broom
But she didn’t what she was doin’
She could hardly understand
That she was really sweepin’ up
Pieces of a man

I saw my daddy greet the mailman
And I heard the mailman say
“now don’t you take this letter to heart now Jimmy
Cause they’ve laid off nine others today”
But he didn’t know what he was saying
He could hardly understand
That he was only talkin’ to
Pieces of a man

I saw the thunder and heard the lightnin’
And felt the burden of his shame
And for some unknown reason
He never turned my way

Pieces of that letter
Were tossed about that room
And now I hear the sound of sirens
Come knifing through the gloom
But they don’t know what they are doing
They could hardly understand
That they’re only arresting
Pieces of a man

I saw him go to pieces
I saw him go to pieces
He was always such a good man
He was always such a strong, strong man
Yeah, I saw him go to pieces
I saw him go to pieces

My correspondent (N.) indicated that we should listen to this when some commentator starts pitching for a UBI rather than a Job Guarantee.

Good tip.

I also love his track Winter in America from the 1974 album of the same name, with classic lines like “Like the forest buried beneath the highway Never had a chance to grow”.

Upcoming events

On the Reclaiming the State theme, I will be visiting Europe next week for two weeks.

Two events might be of interest:

1. Helsinki, February 27, 2018 – I will be giving 6 lectures on Modern Monetary Theory (MMT) at the University of Helsinki in late February and early March as part of a new international studies program. The first lecture will be a public event and will be held on Tuesday, February 27, 2018.

2. Barcelona, March 2-3, 2018 – I will be speaking at events organised by the Catalonian-based Ekona coop, which aims to promote innovation in the public and community sphere to move towards a new democracy. It is particularly focused in influencing the European Left to abandon their neoliberal ideas about economics.

I will circulate more details soon of both events.

MMT University Logo competition

I am launching a competition among budding graphical designers out there to design a logo and branding for the MMT University, which we hope will start offering courses in October 2018.

The prize for the best logo will be personal status only and the knowledge that you are helping a worthwhile (not-for-profit) endeavour.

The conditions are simple.

Submit your design to me via E-mail.

A small group of unnamed panelists will select the preferred logo. We might not select any of those submitted.

It should be predominantly blue in colour scheme. It should include a stand-alone logo and a banner to head the WWW presence.

By submitting it you forgo any commercial rights to the logo and branding. In turn, we will only use the work for the MMT University initiative. It will be a truly open source contribution.

The contest closes at the end of March 2018.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

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This Post Has 10 Comments

  1. Also, “taxing the rich” means us ordinary folk don’t have to pay so much tax.
    As Michael Hudson shows; 60% of income disappears on various taxes & other charges before a family has anything left to spend!

  2. Please can they tape and YouTube your lectures. We need more of you and at a beyond the basics level for those of us who have seen all the talks currently on YouTube. Cheers.

  3. “I said that there are good reasons for increasing the spending capacity of the rich (via taxes etc) but none of those reasons relate to whether the government has the financial capacity to provide first-class public services to the poor (or the rest of us).”

    Should increasing be decreasing?

    Personally I prefer to decrease the spending capacity of the rich whilst of course understanding that doing so is not necessary to provide social services ;-).

  5. So much of what you have written is correct! however to points need to be made 1) money created comes at a cost(interest) and therefore money not put to work for the reason it was created drags on the money that is at work(falsifying values) 2) to return these values to somewhere more in equalibrium there is 3 ways i) create the same amount of money on the other side of the equation to a) stop asset bubbles b) ease the burden of money at work(but that is inflationary) ii) tax the money out of existance i) to reset the asset bubbles based on the money at work ii) this is problematic since you still have to pay back the interest on the money already created and it still isn’t at work(So is deflationary) iii) is a mixture of the two,taxation and creating money on the other side of the equation (putting money to work),this is obviously still inflationary but can be done of a much lnger period of time and by watch the dynamism of any economy you still able to deflate or inflate has needed until the economy stablises,the problem with this is time any new government could switch back and we could return back to instability and inequality very quickly! i prefer the 3 option but we could be seesawing for a millenia before the economy reaches full optimiumisation

  6. “A consequence of the fiat system is that governments that issue their own currencies no longer have to ‘fund’ their spending.”

    Unfortunately I think just that concept alone is a ‘bridge too far’ for the general public to accept, especially considering the mass media propaganda apparatus, wealth, power, political and academic resources of the corporate oligarchy and plutocracy that are determined to maintain the current mainstream economic misconceptions and lies.

    In any case for a national economy that did have full employment, a job guarantee program, the appropriate level of currency issuance and well resourced government services across the board at the federal, state and local level as well as an ambitious and rapid transition to environmental sustainability, I would think taxation at similar levels to current levels would still be needed to keep inflation low? If this is not right then what would the overall federal tax take need to be under these circumstances? 75% 50% 25% of current levels?

    If under the previously mentioned macroeconomic circumstances, taxation at a substantial portion of current levels was still required then the current psychological motivators of ‘taxation pays for needed government services’ or ‘we have always paid taxes’ are still likely to be far more powerful and effective motivators than ‘to create economic space for government spending to control inflation’ or for the purpose of social justice, to reduce inequality and to reduce the political power of the wealthy.

    Realistically I think nearly all of the worthy social/economic/environmental aims of ‘progressive’ MMT adherents can be achieved if just the following concept is accepted. That national government deficits can be funded from central bank currency issuance and that such issuance is at the optimal level when full employment is attained and such issuance is not unduly inflationary up to that point that full employment is attained, nor is any debt incurred.

    The academics, commentators and decision makers should however ideally understand the MMT reality.

  7. i would like add a point to my last post, that although tax destroys money,over paying ie to higher taxation destroys money above what is due(bonds etc)in that year ,but it does not neccessarily destroy the interest due on that money!! making using taxation only has another negative,it once again will act as a drag on any newly created money that is put to work!

  8. I am afraid you become what you mock a so called progressives and a so called
    social democrat if you do not advocate taxing or expropriating the wealth of the rich.
    The whole point of neo liberalism is to redistribute wealth ,claims on real resources,
    to the rich.The economic theory is a fig leaf to that aim.
    Yes the state has the power to spend as much of its currency as it chooses.It also has
    the power to tax and destroy the money it chooses and it should use both powers to
    advance the interests of the 99%and that means reducing the 1% claims on real resources.
    You can be a right wing MMT advocate but that does not make you a social democrat or
    a progressive.I am not suggesting Bill is a right wing MMT advocate.

  9. Is corporate tax a useful tax?

    Would it be better to use steeply progressive wealth and income taxes, including a maximum wealth level and a maximum income level for individuals, to keep inequality of wealth and income down to healthy levels?

  10. Saying that a job guarantee is better than basic income is like saying we need the rich’s taxes to fund government. Why can’t the unemployed figure out what to do for themselves without needing some authority to tell them what to do?

    If the guy in the song had an income he should figure out what he could do to improve himself and others. He doesn’t need to rely on a boss to keep him together …

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