Novel Tax Solutions

[Horatio Parker]

The MMTers say taxation should be used to control inflation, similar to how the Fed maintains the overnight rate through open market operations.

Banks with excess reserves can lend them to another bank. Or banks needing reserves can borrow them from another bank, as opposed to going to the Fed.


Sent from my iPhone using Tapatalk

 

[Horatio Parker]

Accidentally hit "send"...anyway, when Volcker ran the Fed, he attempted to control the money supply by limiting credit creation to $50B/mnth. That drove the overnight rate over 25%.

The point is that inflation could be controlled in the same way as the Fed/Treasury open market operations. When the economy heats up, raise taxes to remove purchasing power. Or lower them to expand the economy. Right now, with the economy rather weak, lower taxes are in order. Probably the most effective one would be a payroll tax holiday.


Sent from my iPhone using Tapatalk

 

[bilby]

Large changes to complex and highly evolved systems are almost always disastrous.

This applies just as much to the taxation regimes of developed mixed capitalist/socialist economies (which all of the OECD nations have) as it does to the genomes of current species of plants and animals; or to the systems of governance of nation states. Gradual changes, rolled back if they cause major problems, and retained if they appear to improve things, are almost certainly going to be FAR better than revolutionary new systems; The vanishingly few examples of revolutions that were not disastrous for the people involved in the short to medium term occur only when the initial state was already about as bad as it could be.

In short, if it ain't broke, don't fix it.

Nobody fully understands how the economy works; In such an environment, throwing a large spanner in the works is almost certain to do a LOT of unanticipated harm, and to have a large number of unintended consequences.

Dunning-Kruger applies; The only people who think their radical changes to taxation will produce an outcome superior to the status quo are people who are too poorly informed about economics to even recognize that they are incompetent to develop a complete, workable, and effective taxation system from scratch.

Most of the nutters with a big idea about how to massively overhaul the tax system don't even know what taxes are for - some even still think that taxes somehow fund government spending.

 

[bilby]

Accidentally hit "send"...anyway, when Volcker ran the Fed, he attempted to control the money supply by limiting credit creation to $50B/mnth. That drove the overnight rate over 25%.

The point is that inflation could be controlled in the same way as the Fed/Treasury open market operations. When the economy heats up, raise taxes to remove purchasing power. Or lower them to expand the economy. Right now, with the economy rather weak, lower taxes are in order. Probably the most effective one would be a payroll tax holiday.


Sent from my iPhone using Tapatalk

The same effect could be better achieved by spending increases, while leaving taxes unchanged. Unless you think that there are no currently unfunded or underfunded infrastructure repairs or construction that would be a benefit to the nation at this time - all of the highways and bridges are in perfect order, as are electricity grids, communications networks, water and sewerage, provision of health-care, etc., etc.

 

[Horatio Parker]

Accidentally hit "send"...anyway, when Volcker ran the Fed, he attempted to control the money supply by limiting credit creation to $50B/mnth. That drove the overnight rate over 25%.

The point is that inflation could be controlled in the same way as the Fed/Treasury open market operations. When the economy heats up, raise taxes to remove purchasing power. Or lower them to expand the economy. Right now, with the economy rather weak, lower taxes are in order. Probably the most effective one would be a payroll tax holiday.


Sent from my iPhone using Tapatalk

The same effect could be better achieved by spending increases, while leaving taxes unchanged. Unless you think that there are no currently unfunded or underfunded infrastructure repairs or construction that would be a benefit to the nation at this time - all of the highways and bridges are in perfect order, as are electricity grids, communications networks, water and sewerage, provision of health-care, etc., etc.

Spending is of course the flip side of taxes.

I still think a payroll tax holiday is a simpler way to expand spending, but yes govt spending achieves the same end, provided the money reaches someone who will spend it. The trillions created post-2008 didn't do anything for the average person. In fact, QE was a contractionary move, since it removed the interest income from the private sector.

When it comes to contraction, I imagine the causes of inflation may be an indication whether taxing more or spending less is more effective.

But the thread is about taxes, so...