Is Tax Hygiene?

Been reading the essays in Modern Monetary Theory: Key Insights, Leading Thinkers and so might make a few comments over the next weeks.

Overall

The book is too boring. A lot of excess verbiage. But no matter, all the essays are worth reading, just some are real snoozers though.

Also, f$\ast\ast$k! MMT is sooo UK centric man! Can’t f$\ast\ast$ing apply anywhere else, oh… maybe in the EU? ;-)

Is Tax a Hygiene factor?

Neil Wilson wrote the chapter 9, “Tax as a hygiene factor: setting UK taxation policy using Modern Monetary Theory”.

The way Neil puts the case, for sure, tax is metaphorically like economic hygiene.

A Better Metaphor

Problem is, the core function of taxation is to drive demand for the otherwise worthless currency.

Getting a more accurate metaphor, so more like an analogy, can be difficult. We’d need to satisfy at least two critical features:

1. Coercion — tax is a liability imposed by a governing force.
2. Without the tax the value of the currency “goes to zero” (eventually).

Thing is, a tax-driven currency is a fairly unique sort of thing. There’s nothing else like it, if there were something like it, it would be a currency, so not an analogy, but an isomorphism.

However, Mosler does offer a few near isomorphisms:

• Movie tickets.
• Train passes.
• Theme Park passes.
• Grocery or store vouchers.
• Parents run household chores using their IOU.

None of these have the feel of “hygiene” to me.

So what are taxes like really?

To answer this a mathematicians hat is superior to an engineers. (Wilson is an engineer.)

The mathematician seeks to abstract and generalize. When we do so for all the above types of “currency” we find taxation is the demand driver for an otherwise worthless IOU. What is the pure abstraction then?

Generalized tax is the monopoly force side of a Covenant.
The other side of the covenant is the citizen.

This works in every case, so is the correct abstraction. The Movie Theatre is the monopoly provider of (for a particular local village, let’s say) a film, they tell you what you need to do to get their tickets.

In every case something is promised in redemption, which is why the IOU is accepted.

In every case a secondary market can get going with other private goods for sale in the tax credit. Movie theatres and theme parks etc., generate scalpers. The secondary markets get limited by the existence of a more dominant tax. The “need to go to the movies” is not a huge demand driver.

The need to pay taxes is an enormous demand driver, it’s practically debilitating for many, crippling, a source of constant anxiety, it is ruthless.

All the more reason the currency issuer must learn the purpose of their tax is not to create such anxiety, and that they have the sole means for causing this anxiety, and have a moral obligation to relieve this anxiety.

But not using a UBI. That would defeat the purpose.

The purpose is to provision the state for the greater public good. Once the public purpose is achieved with available resources, the tax has served proper purpose, the means to pay the tax will have been provided, and tax liabilities extinguished.

One source of anxiety is an insatiable desire to “save up” the tax credits.

Why does this not seem to apply to the Movie Theatre or Theme Park? It is because they always issue enough of their tax credits to satisfy demand.

Governments do not tend to understand this, because they do not understand the purpose of their currency. However, a secondary market is a further driver of insatiable savings desires, and the government needs to acknowledge this and so provide the demand for the tax credit to satiate those desires too — not just the means to pay the tax. Otherwise unemployment will result — a senseless waste of human lives which cripples us all even if many do no feel the pain.

Unemployment is defined by MMT as people seeking exchange to earn the tax credit.

(You cannot argue with a definition, you can argue that it is not common usage.)

It is thus more than a hygiene factor. Taxation is a Public Covenant, and if the Keeper of the Covenant fails to make their side binding we see great suffering.