Does Taxation destroy employment?

This seems to be a common idea among the Georgists, who are right about land, but not about tax.

Worryingly, it seems also to be an idea that Modern Monetary Theorists (MMTers) suggest (as outlined in this interesting argument between Steve Keen and Warren Mosler – I cannot really recommend it as the production and sound is so poor). So some MMTers, too, think that unemployment is caused by taxing too much.

Taxation might well destroy jobs. Especially in the UK where National Insurance is, of course, simply a tax on jobs. It is not insurance at all and, as it has a top cut off limit, it has a regressive effect and so acts as an income tax that is especially onerous on the poorly paid. But of course any tax will help to make employment more difficult and that is why the Georgist Land (value) Tax is a good idea because it targets a limited resource that just exists. But a tax on land is unlikely to be the only tax required – particularly as these days, the state’s expenditure amounts to almost 40% of GDP every year.

That means that whilst taxation is likely to destroy some employment, then, (with both government and private bank money spent into the economy) inflation is likely to do an even better job. Inflation is unpredictable and unstable whereas taxation is a known quantity. Taxation therefore, has the effect of quietening the path of inflation and so destroys employment much less than inflation would do without it.

Georgists are usually libertarians but, in the UK at least, generally looking, also, for social justice. As too, are most MMTers.

Although Georgists may have invented the ‘Landlord’s Game’ now known as Monopoly which is still going strong, they do need to realise that we have moved on from the days of their founder. Libertarianism is fine and dandy. But the state is us and we need that rule of law. As the state spends large amounts of money into the economy we need progressive tax to gradually remove it.

It is both concerning and surprising that some MMTers do not seem to realise this.

 

 

Comments

  1. Charles Adams -

    At the end of the day, when one generation of consumers and their consumer goods are back in the ground, all that is left is the land and the structures upon it, and the knowledge that is passed down from one generation to the next.

    Pretty much all ‘wealth’ is in the value of land/property and intellectual ‘property’ in its broadest sense. Piketty is very good on this point.

    It is pretty stupid to tax ‘work’ as society wants people to do stuff, much better to mop up excess money, stimulate the flow and maximise economic activity by taxing rent extraction instead.

  2. Peter May -

    Good points, and so taxing what used to be called,I think, unearned income much more than wages would be a start. I just wonder whether with the state spending such a large proportion of GDP whether labour could ever be completely tax free, without inflation taking off. Suppose you’d just have to gradually try it and see!

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