Why we should raise taxes on the rich

[Jason Harvestdancer]

It is still boggling to think that the purpose of taxation is controlling inflation instead of funding. Back when government did not control the currency, it was certainly about funding, and there as a time not very long ago when it didn't control the currency.

 

[bilby]

That's something that has always bugged me. Sure, gold is useful, but so is paper. It is only our "faith" that others will perceive value in gold or paper that makes either of them perform as viable currency in exchange for goods or services. Yet, so many who bemoan "fiat currency" seem oblivious to that obvious fact. Truth be told, "fiat currency" is a bit of a redundancy.

Because it is easier to increase the money supply when you have a paper base than it is to increase the money supply when you have a commodity base. It doesn't have to be gold, it can be anything that is: uniform, divisible, scarce, few other uses, etc. You can do that with many commodities, and you can theoretically do it with paper, but the scarcity of paper is much more variable especially when you have politicians meddling with the money supply. The government did not and cannot control a commodity currency.

That's nonsense.

There is VASTLY more refined gold in stockpiles worldwide than we have any use for. So it is intrinsically worth almost nothing, just as with any other commodity whose supply massively exceeds its demand. The only reason why gold is valued is that it is currency - which is the EXACT SAME reason that bits of paper with $1 printed on them in official script are valued. The value of a gold based currency is entirely dependent upon how much of it is demanded in payment for stuff - and in most historical gold based currencies, the main driver of demand for gold has been taxation.

Commodity money is just poorly designed fiat money, which is subject to random injections of new money when a miner strikes it rich, rather than being subject to controlled injections of new money when the government decides it is warranted.

 

[bilby]

Specially printed pieces of paper. Note in the description you snipped, I included the word "scarce". That is an important point, that is why there are people derisively referred to as "gold bugs". I acknowledged it doesn't have to be gold. Can you acknowledge that paper is far more inflatable than a commodity based currency?

I don't acknowledge that paper is not a commodity. Yes, it can be produced more easily than can purified heavy metals. But that's all. They're both still "fiats" that can be exchanged for stuff that an individual might need/want more than they need/want chunks of a purified metal.

Do you imagine that the difficulty of extracting gold or silver from the earth and purifying it confers upon it some intrinsic value that transcends individuals' circumstances?

I am struggling to see the difference between 'Gold is valuable because it is difficult to obtain' and the Marxist lunacy that is the Labour theory of value, wherein any item is more valuable if it took a lot of effort to make it. Both seem to be the same falsehood viewed from opposite political poles.

 

[bilby]

It is still boggling to think that the purpose of taxation is controlling inflation instead of funding. Back when government did not control the currency, it was certainly about funding, and there as a time not very long ago when it didn't control the currency.

Well if you think a return to the middle ages is a good idea, then I am here to tell you that you are a fucking idiot. Inflation was basically nonexistent in the middle ages, when governments didn't control currency, as was economic growth. Almost everyone was as poor as dirt, and even the king had a life that 99% of modern Americans would consider a step down in lifestyle.

Your incredulity is not an argument for anything; It is an observable fact that the purpose of taxation is not funding of government activity, and that has been the case since governments realized that they could regulate banks, thereby taking control of the money supply from a handful of individual bankers, who up until that time had been making out like bandits, at the cost of screwing over everyone else in the economy (often including various governments).

 

[Elixir]

I don't acknowledge that paper is not a commodity. Yes, it can be produced more easily than can purified heavy metals. But that's all. They're both still "fiats" that can be exchanged for stuff that an individual might need/want more than they need/want chunks of a purified metal.

Do you imagine that the difficulty of extracting gold or silver from the earth and purifying it confers upon it some intrinsic value that transcends individuals' circumstances?

I am struggling to see the difference between 'Gold is valuable because it is difficult to obtain' and the Marxist lunacy that is the Labour theory of value, wherein any item is more valuable if it took a lot of effort to make it. Both seem to be the same falsehood viewed from opposite political poles.

Even given Labor theory (a misnomer in itself), it only operates at scale. For example I could pan $100 'worth' of gold right in front of my house, with less labor (and time and expense) than it would take me to create $100 in passable paper currency...

It's interesting that the last couple of times I've been in Mexico haggling with vendors, they assigned more value to four $5 bills than to one $20 bill.

 

[Canard DuJour]

It is still boggling to think that the purpose of taxation is controlling inflation instead of funding.

Only if you think the economy is just a big household or firm - and it's perfectly understandable that most folks do. It's intuitive and most public political discourse assumes so. Gov'ts certainly know it isn't true or they couldn't operate as they do. Hence, for example, the disconnect between conservative parties scaremongering about deficits and their willingness to run them in office.

Back when government did not control the currency, it was certainly about funding, and there as a time not very long ago when it didn't control the currency.

What bilby said.

 

[Bomb#20]

I am struggling to see the difference between 'Gold is valuable because it is difficult to obtain' and the Marxist lunacy that is the Labour theory of value, wherein any item is more valuable if it took a lot of effort to make it. Both seem to be the same falsehood viewed from opposite political poles.

"My lord, we love our King. His wise remarks are valued by his court as precious stones."

"And for the self-same cause. Like precious stones, his sensible remarks derive their value from their scarcity!"

- Gilbert & Sullivan

 

[Horatio Parker]

Fiat currency is not more inflatable due to circumstance, it is more inflatable by nature and design. Absent either an atom smasher or vague myths about alchemy, you really can't create more gold. Mining it is a laborious process. There have been examples of heavy inflation with precious metals, for example when funinspace mentioned the Spanish Hapsburgs. That is the exception, not the norm. Meanwhile paper currency is always subject to deflation. The US dollar, generally regarded as sound and strong, has lost 97% of its value since the US switched away from a gold standard. Some people call that stable, but I don't know why.

And funinspace, thanks for getting the reference.

So what if the dollar's value has eroded. Income and living standards have increased far more than 97% in 100 years.

It's not about one dollar; it's about all the dollars. All of our dollars buy infinitely more than all the dollars of 100 years ago.

 

[Derec]

Focusing on the federal income tax is a bit misleading since it ignores the effects of the FICA and Medicate taxes,

Medicare is included in FICA. The difference between FICA and regular taxes is that FICA is really a mandatory insurance, it does not go into general coffers.

and federal excise taxes on tax progressivity.

Well, even the graph including all that that was posted here shows a great deal of progressiveness in US taxes.

 

[Elixir]

All of our dollars buy infinitely more than all the dollars of 100 years ago.

Yup. 100 years ago the entire US treasury couldn't buy you a single iPhone!

 

[Loren Pechtel]

Fiat currency is not more inflatable due to circumstance, it is more inflatable by nature and design. Absent either an atom smasher or vague myths about alchemy, you really can't create more gold. Mining it is a laborious process. There have been examples of heavy inflation with precious metals, for example when funinspace mentioned the Spanish Hapsburgs. That is the exception, not the norm. Meanwhile paper currency is always subject to deflation. The US dollar, generally regarded as sound and strong, has lost 97% of its value since the US switched away from a gold standard. Some people call that stable, but I don't know why.

And funinspace, thanks for getting the reference.

Gold generally results in deflation as the mining rate doesn't keep up with the economy.

And there's a probable huge gold deposit under the Caloris basin. It's very deep and very harsh conditions but someday it would be viable--and there's likely a layer of solid gold down there. What happens when it reaches the point we can go for it?

 

[Loren Pechtel]

There is VASTLY more refined gold in stockpiles worldwide than we have any use for. So it is intrinsically worth almost nothing, just as with any other commodity whose supply massively exceeds its demand. The only reason why gold is valued is that it is currency

Gold also has value as jewelry.

 

[Elixir]

There is VASTLY more refined gold in stockpiles worldwide than we have any use for. So it is intrinsically worth almost nothing, just as with any other commodity whose supply massively exceeds its demand. The only reason why gold is valued is that it is currency

Gold also has value as jewelry.

If all the gold in stockpiles were on the open market, it would have little more value than any other gold-colored costume jewelry.

 

[Loren Pechtel]

I don't acknowledge that paper is not a commodity. Yes, it can be produced more easily than can purified heavy metals. But that's all. They're both still "fiats" that can be exchanged for stuff that an individual might need/want more than they need/want chunks of a purified metal.

Do you imagine that the difficulty of extracting gold or silver from the earth and purifying it confers upon it some intrinsic value that transcends individuals' circumstances?

I am struggling to see the difference between 'Gold is valuable because it is difficult to obtain' and the Marxist lunacy that is the Labour theory of value, wherein any item is more valuable if it took a lot of effort to make it. Both seem to be the same falsehood viewed from opposite political poles.

Oh, yeah!

How about a new currency:

The Anti$. It consists of microgram quantities of anti-tungsten in magnetic bottles.

It's very hard to produce so it's valuable.

It's very compact to store.

It's not based on the luck of the draw as to where the deposits are so it's fair.

And there's the added bonus that nobody wants it around (if the bottle fails it detonates with the energy of 40kg of TNT) so people spend it fast. You could say the economy would be booming.

 

[Jason Harvestdancer]

I looked into this new concept, that taxation isn't about funding the government but is about controlling inflation. It comes from the MMT, variously named either Modern Money Theory, Modern Monetary Theory, or Magic Money Tree. It is based on the current ahistorical position that currency is printed out of nothing by central banks.

What's funny is even Daily Kos was accurate in their criticisms of it, and they're almost always wrong when it comes to economics.

Boring, Stupid, Wrong: MMT

I suppose I'm obliged to "explain" MMT. That's a trap, because no matter how I describe its principles, its advocates will respond that I've got it wrong (rather like what happens should one ever make a categorial statement about buddhist philosophy). And indeed, this is my first complaint about MMT: most of its proponents don't seem to be able to articulate its principles in a consistent, coherent set of sentences that a well-educated, well-informed, highly-intelligent individual can make any fucking sense out of. They can't even seem to decide whether MMT stands for "Modern Money Theory" or "Modern Monetary Theory", a distinction that turns out to be more important than anybody outside the cult might think.

They do seem to agree that "Modern" refers to the Money, and not the Theory, which is good, because the Theory -- or at least, the parts of it that are neither stupid nor wrong -- is old hat. The most perplexing thing about MMT is not in its ideas, but in its devotees' excitement at believing they possess knowledge that is:

A. Arcane
B. Subtle
C. Paradigm-shifting

MMT is none of these things. Ultimately, the core of MMT is simply the observation that in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation.

If you just take those two elements and run with them, you've proposed nothing that should surprise anyone with 6 credits' worth of undergraduate economics courses. When I get into arguments with MMTrs, I am usually at some point told that I don't understand economics -- that in fact, I don't know the first thing about economics or money. The only thing I don't understand is why MMTrs think there's something bold, exciting and new in their philosophy.

Ironically, it is the MMTrs who do not seem to understand what money is. They imbue money with an almost magical intrinsic value: We don't have enough circulating in the economy, so make more -- make as much as we want -- and all will be well. Most especially, no matter how much we make, we needn't worry about making too much. Ever.

Here's a more detailed analysis by a more professional source.

Weekender: The Trouble With Modern Monetary Theory (MMT)

 

[bilby]

I looked into this new concept, that taxation isn't about funding the government but is about controlling inflation. It comes from the MMT, variously named either Modern Money Theory, Modern Monetary Theory, or Magic Money Tree. It is based on the current ahistorical position that currency is printed out of nothing by central banks.

What's funny is even Daily Kos was accurate in their criticisms of it, and they're almost always wrong when it comes to economics.

Boring, Stupid, Wrong: MMT

I suppose I'm obliged to "explain" MMT. That's a trap, because no matter how I describe its principles, its advocates will respond that I've got it wrong (rather like what happens should one ever make a categorial statement about buddhist philosophy). And indeed, this is my first complaint about MMT: most of its proponents don't seem to be able to articulate its principles in a consistent, coherent set of sentences that a well-educated, well-informed, highly-intelligent individual can make any fucking sense out of. They can't even seem to decide whether MMT stands for "Modern Money Theory" or "Modern Monetary Theory", a distinction that turns out to be more important than anybody outside the cult might think.

They do seem to agree that "Modern" refers to the Money, and not the Theory, which is good, because the Theory -- or at least, the parts of it that are neither stupid nor wrong -- is old hat. The most perplexing thing about MMT is not in its ideas, but in its devotees' excitement at believing they possess knowledge that is:

A. Arcane
B. Subtle
C. Paradigm-shifting

MMT is none of these things. Ultimately, the core of MMT is simply the observation that in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation.

If you just take those two elements and run with them, you've proposed nothing that should surprise anyone with 6 credits' worth of undergraduate economics courses. When I get into arguments with MMTrs, I am usually at some point told that I don't understand economics -- that in fact, I don't know the first thing about economics or money. The only thing I don't understand is why MMTrs think there's something bold, exciting and new in their philosophy.

Ironically, it is the MMTrs who do not seem to understand what money is. They imbue money with an almost magical intrinsic value: We don't have enough circulating in the economy, so make more -- make as much as we want -- and all will be well. Most especially, no matter how much we make, we needn't worry about making too much. Ever.

Here's a more detailed analysis by a more professional source.

Weekender: The Trouble With Modern Monetary Theory (MMT)

You obviously didn't look very hard, as your own source explicitly states that "If you just take those two elements and run with them, you've proposed nothing that should surprise anyone with 6 credits' worth of undergraduate economics courses."; In other words, that "in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation" is, according to your source, so obviously true as to barely be worth saying.

It then goes on to talk about MMT, which (it claims) is based around this statement of the obvious - but clearly is not THE SAME THING, as it is being declared to be incorrect - and indeed, insofar as MMT actually does make the claim that "no matter how much [money] we make, we needn't worry about making too much. Ever.", it would be hopelessly wrong - and as such the exact opposite of so obviously true as to barely be worth saying.

You need to decide what it is you are opposing here.

Are you opposing the claim that in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation? If so, your source here is declaring you to be OBVIOUSLY and completely wrong, because according to your source, this is so self evidently true that it "should surprise anyone with 6 credits' worth of undergraduate economics courses". And yet you seem to believe it to be false.

Or are you opposing the claim that no matter how much money we make, we needn't worry about making too much? If so, you need to first find someone who is making that claim, before it is reasonable to oppose it; Certainly nothing any of your correspondents in this thread have said can be construed as making such an obviously false claim. So the question becomes 'Why are you fighting a strawman'?

I would suggest that this 'new' concept - that taxation isn't about funding the government but is about controlling inflation - does NOT come from MMT, but is rather one of the axioms upon which MMT appears to be constructed. Certainly my understanding of the concept cannot come from MMT, because I have no idea what MMT actually says (other than what your source above claims it to say). I have understood this concept based on a variety of sources and a knowledge base built up over many years; I have never knowingly studied or been exposed to the details of anything calling itself MMT, so arguing against this theory in no way constitutes any kind of argument against my position.

Still, it's always amusing when someone presents, as evidence for their position, an article claiming that their opponent's position is so bloody obviously true as to be barely worthy of mention.

 

[Horatio Parker]

I looked into this new concept, that taxation isn't about funding the government but is about controlling inflation. It comes from the MMT, variously named either Modern Money Theory, Modern Monetary Theory, or Magic Money Tree. It is based on the current ahistorical position that currency is printed out of nothing by central banks.

What's funny is even Daily Kos was accurate in their criticisms of it, and they're almost always wrong when it comes to economics.

At least you're looking into it. But you can do better than this criticism. If I can debunk it, it's not very serious.

MMT doesn't state that deficits don't matter. MMT says that deficits are an accounting identity indicating the amount of financial assets remaining in the private sector after govt spending. Alone, they don't mean much, their relevance is one part of the overall picture involving the govt, private and foreign sectors. Depending on the situation, larger or smaller deficits, or even surpluses may be called for. But exploiting a manufactured fear of deficits to suppress social spending is usually a red herring.

And neither can we spend without limit. What MMT says is that the constraint is real goods and services, not finances. There is no financial restraint on govt spending. There are, obviously, real constraints.

And the critique isn't even consistent. After crowing over and over again that monetary sovereignty is nothing new, he goes on to say that the dollar is nevertheless highly dependent on the bond markets. He even imputes to MMT the absurdity that, given the geopolitical strength of the US and the dollar, there's nothing to fear regarding the dollars value. MMT says nothing like this.

MMT is not a policy package; it's a lens through which to view the economy. Looking through that lens does tend to bring out problems with neoliberalism and austerity, with obvious policy implications.

I couldn't read any further.

Better take it up a notch.

 

[LordKiran]

I looked into this new concept, that taxation isn't about funding the government but is about controlling inflation. It comes from the MMT, variously named either Modern Money Theory, Modern Monetary Theory, or Magic Money Tree. It is based on the current ahistorical position that currency is printed out of nothing by central banks.

What's funny is even Daily Kos was accurate in their criticisms of it, and they're almost always wrong when it comes to economics.

Boring, Stupid, Wrong: MMT



Here's a more detailed analysis by a more professional source.

Weekender: The Trouble With Modern Monetary Theory (MMT)

You obviously didn't look very hard, as your own source explicitly states that "If you just take those two elements and run with them, you've proposed nothing that should surprise anyone with 6 credits' worth of undergraduate economics courses."; In other words, that "in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation" is, according to your source, so obviously true as to barely be worth saying.

It then goes on to talk about MMT, which (it claims) is based around this statement of the obvious - but clearly is not THE SAME THING, as it is being declared to be incorrect - and indeed, insofar as MMT actually does make the claim that "no matter how much [money] we make, we needn't worry about making too much. Ever.", it would be hopelessly wrong - and as such the exact opposite of so obviously true as to barely be worth saying.

You need to decide what it is you are opposing here.

Are you opposing the claim that in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation? If so, your source here is declaring you to be OBVIOUSLY and completely wrong, because according to your source, this is so self evidently true that it "should surprise anyone with 6 credits' worth of undergraduate economics courses". And yet you seem to believe it to be false.

Or are you opposing the claim that no matter how much money we make, we needn't worry about making too much? If so, you need to first find someone who is making that claim, before it is reasonable to oppose it; Certainly nothing any of your correspondents in this thread have said can be construed as making such an obviously false claim. So the question becomes 'Why are you fighting a strawman'?

I would suggest that this 'new' concept - that taxation isn't about funding the government but is about controlling inflation - does NOT come from MMT, but is rather one of the axioms upon which MMT appears to be constructed. Certainly my understanding of the concept cannot come from MMT, because I have no idea what MMT actually says (other than what your source above claims it to say). I have understood this concept based on a variety of sources and a knowledge base built up over many years; I have never knowingly studied or been exposed to the details of anything calling itself MMT, so arguing against this theory in no way constitutes any kind of argument against my position.

Still, it's always amusing when someone presents, as evidence for their position, an article claiming that their opponent's position is so bloody obviously true as to be barely worthy of mention.

I mean...Just at face value his ideas are wrong...That something can hold 'objective value' so as to serve as a non-fiat currency? Wat?

 

[Elixir]

...exploiting a manufactured fear of deficits to suppress social spending is usually a red herring.

HP wins the thread.

 

[lpetrich]

I recall politician Daniel Moynihan once stating that the gold standard would put monetary policy in the hands of the gold miners.

When Spain built its empire in the New World, its citizens likely expected all the gold and silver that they mined there to make them rich. But instead it caused lots of inflation. In 1603, a French traveler said about Spain that "Everything is dear in Spain except silver".

Alchemists are nowadays best known for trying to make gold. But some people feared the economic consequences of their succeeding. In 1404, King Henry IV of England outlawed the "multiplying of gold and silver". That law was repealed in 1688, from the lobbying of (al)chemist Robert Boyle.

It's possible to make gold with nuclear reactions, but it is very expensive to do so.

1 MeV (common unit in nuclear and particle physics) * (Avogadro's number) = 9.64*10¹⁰ joules = 2.67*10⁴ kilowatt-hours. That's one mole of (1 MeV / atom).

Electricity prices vary widely, but 10 USD cents / kWh gives $2,670.

Let's apply 1 MeV per nucleus to gold. It has atomic weight 196.96657, meaning that 1 mole of gold weighs 197 grams. 1 troy ounce weighs 31.1034768 grams, so 1 troy ounce is 0.158 mole. If one needs only 1 MeV per atom to make gold, it would cost only $422 per troy ounce.

But 1 MeV/nucleon is rather grossly optimistic. The easiest way to make gold with nuclear reactions is to irradiate some lower-atomic-mass elements with neutrons. That's because neutrons can get past the electrostatic fields of nuclei very easily. One can put one's raw materials in a nuclear reactor, but that does not have a very high neutron flux. A quicker route would be to make an intense neutron beam by spallation -- accelerating electrons or protons and hitting nuclei with them. One would need a few MeV to have enough energy to knock out a nucleon (proton + neutron), and even then, lots of protons and small nuclei will be knocked out in addition to neutrons. So with 1 proton vs. 1 neutron, that gives a factor of 2.

So even platinum-to-gold is very expensive. Less expensive elements will require more neutrons per nucleus, and that will be even more expensive.

As a rough, hand-waving guess, I'll multiply the amount of energy needed by 100, and that gives $42,200 per troy ounce -- very expensive.