Tag Archives: redistribution

Taxes and the Public Purpose

By L. Randall Wray

In previous instalments we have established that “taxes drive money”. What we mean by that is that sovereign government chooses a money of account (Dollar in the USA), imposes obligations in that unit (taxes, fees, fines, tithes, tolls, or tribute), and issues the currency that can be used to “redeem” oneself in payments to the government. Currency is like the “Get Out of Jail Free” card in the game of Monopoly.

Taxes create a demand for “that which is necessary to pay taxes” (and other obligations to the state), which allows the government to purchase resources to pursue the public purpose by spending the currency.

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Pre-distribution or redistribution? The Piketty moment, the Democrats, and the oncoming elections (Guest Post)

By L. Randall Wray

I’ve been blogging a series on the role of taxes. In the first piece, I argued that “taxes drive money”, in response to a silly claim that MMT argues we do not need taxes. In the second instalment I examined other uses for taxes—including to reduce excessive aggregate demand and to discourage “sin”. Most importantly, I argued that we do not need taxes to “pay for” sovereign government spending. In the third piece, I argued against the “Robin Hood” view that we need taxes to “take from the rich to give to the poor”. That should be obvious—we can spend on the poor without any tax increase, and indeed could spend on the poor while reducing everyone’s taxes.

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Forget Taxes for Redistribution: What to do about Inequality

By L. Randall Wray

America has discovered inequality. But, as Jared Bernstein says, dealing with that will be expensive. He comes up with a nice wish list of policies to help the poor:

What will work here is a large, publicly funded infrastructure program to begin to repair our deteriorating public goods, with the jobs targeted at the working poor. All of the above — the expanded earned-income tax credit, universal preschool, job-creating infrastructure — will take more tax revenue, and much of that new revenue will need to come from those at the top of the wealth scale. 

He wags his finger at those who think there’s some free lunch that would let us help the poor without soaking the rich. Nope, he claims. Uncle Sam needs those taxes. The rich will have to pay-up.

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