If the rich knew what tax was for they might actually appreciate it…

This shortish piece (below in quotation marks) arrived in my inbox a couple of days ago after somebody had viewed the excellent ‘Money for Nothing’ video.

“Three questions:

Why doesn’t the Labour Party explicitly adopt this approach [that money is created out of thin air and we spend and tax in fact] to tax and spend?

Why doesn’t the Tory party adopt it? (I assume the reasons are different)

Following the second, why austerity?”

The sender offers suggested explanations:

“a) Because Labour need a TINA [There is no alternative] economic reason to tax the rich highly. Telling people we do not need tax money to fund stuff is against this policy.

b) Because Tories need to present a TINA economic reason to cut spending / benefits and shrink the state. Telling people the government has an infinite ability to fund whatever is policy is against this policy.

c.) Because Tories believe in austerity and shrinking the state, and this is a means to keep workers in check

So both a) and b) are political parties using a fake economic narrative to mislead the public into justifying their reasons for policy. This is wrong, so wrong, when our government / opposition is lying to us.

Labour should simply say we believe that taxing the rich highly reduces inequality and is better for society. Tories should simply say we believe that free market capitalism with a bare minimum government is better than a government who runs everything. However, neither believe the public will buy into it. So both of them lie.

And the Tories are better liars (plus the fact they have the press to lie on their behalf)

Labour simply needs to say we tax progressively because it is the right thing to do and not because it pays for the NHS, or whatever, which is not the case.”

Now I broadly agree with all this, though I don’t know whether either parties are lying or just deluded, though you would have thought it would be becoming completely apparent to anyone actually in government that they can create money at will. Whether all their fellow MP’s realise this, I rather doubt – and I fear currently that includes Labour ones.

From a progressive point of view it is decidedly dangerous to suggest that the rich are the only ones capable of financing a decent society. It gives them a prestige and importance that is not justified – see, for example, the chance factor that I’ve mentioned before – never mind the obvious advantages of inheritance.

To suggest that there is a moral purpose to ensure that the rich contribute to society as they properly should is fine, but leaves open the idea of class hatred from the ‘Daily Mail’ contingent.

So I was delighted when I encountered a rather neat justification for taxing the better off. Not only is there the progressive idea that if you don’t tax the rich they will take your income as rent – and the bankers’ astronomical pay clearly proves this – there is actually rather a good reason they should support their own taxation.

When you impart the knowledge that taxation pays for nothing but simply ensures inflation doesn’t get out of control, then this can easily become a justification that could well serve to keep the rich relatively happy.

If the rich want low inflation – and it is profoundly in their interests as they like their money to be a store of wealth – then they should be happy to contribute their taxes as a means of keeping inflation down.

For the wealthy surely cannot sensibly suggest that those less wealthy than they should make a disproportionate effort to keep inflation down on their behalf?

Additionally, keeping inflation down would not , of course, be something not in favour of the less well off, who, after all, tend to have debts where inflation is very much in their interests – because with inflation, debts become, over time, rather smaller and easier to pay.

Tax for the wealthy can be shown to be simply the cost of maintaining affluence.

Tax is actually the quid pro quo of their wealth.

Comments

  1. Andrew Dickie -

    Peter,

    Thanks for this. And never forget the great FDR quote, along the lines of:

    “Taxation is the subscription you pay to belong to a civilised society”.

  2. Richard B -

    How about this as a counter explanation?

    Inflation has not disappeared its been channelled into property and stocks, but that’s of little concern to the majority of voters, who spend rather than save or invest.

    The rich actually want inflation. That is because beyond a certain level wealth is not reduced by inflation because it is not spent. Inflation in properties and shares is to the advantage of the rich.

    The whole right wing shrink inflation policy, from Thatcher onward was just a smokescreen to give a reason to shrink the state and inflate asset values.

    1. Peter May -

      I agree. QE and probably the deregulation of the banks has chanelled inflation into things general inflation doesn’t measure.
      But I don’t think you’ll get the wealthy to admit that they want general inflation, which is why Zimbabwe and Weimar are always trotted out.

  3. Kevin Mason -

    Been meaning to ask a question about MMT of yourselves or Richard Murphy. It’s kind of related to the above. I find MMT and its tax implications quite easy to understand. BUT answering the question ‘who’s gonna pay for it’ or ‘how much will it cost’ can be infuriating if the asker doesn’t really want to know. It always reminds me of the Mark Twain quote ‘ it’s much easier to fool someone than it is to convince them they’ve been fooled’. They always ask one BS question which I now agree, needs answering. If MMT is that good, why doesn’t every politician and economist subscribe to it? I can think of 2 answers – 1) most of those who drive the neolib narrative are tax averse and 2) when a government admits that it doesn’t need to borrow money, it’s potentially game over for those same individuals and institutions. Richard confirmed the second in a recent blog. Any more answers out there that can be easily explained to sheep.

    1. Peter May -

      I know what you mean – that’s why I wrote the piece above!
      MMT is actually, now, effectively subscribed to – dint of necessity…

      Some politicians really don’t understand it – like my otherwise intelligent (Labour) MP who simply says ‘we cannot always have everything we want’.
      Of course this is not what MMT suggests is possible. It suggests simply if the resources are available then they can always be ‘paid’ for.

      Then there are those who lie because they like the existing distribution of money and don’t want the plebs getting ideas.
      I suggest that Theresa May – ex employee of the Bank of England is a good example of that – where, for example – she spoke of unfunded borrowing
      http://www.progressivepulse.org/economics/anyone-for-unfunded-borrowing – and famously of no magic money tree existing.

      Also classical economists are never taught about money.
      When economist Bernard Lietaer
      http://www.progressivepulse.org/economics/bernard-lietaer-rip
      was the Belgian Central Bank’s representative for the Bank of International Settlements (BIS), a fellow delegate had told him that the BIS was all about preserving the status quo, and he left.
      He thereafter concentrated on telling people about money and earned much less…. Academic economists are generally promoted by getting articles in journals – money articles are not accepted.
      See also Steve Keen and ‘Debunking Economics’…

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