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"You pay more taxes because somebody else pays less" is fundamentally misleading. If the government had to balance its income and expenses, then yes, one person

by ef4 10y ago

"You pay more taxes because somebody else pays less" is fundamentally misleading. If the government had to balance its income and expenses, then yes, one person paying less taxes would imply somebody else had to pay more taxes. But that is not how it works. Not for a government that can borrow at practically zero cost. The reality is that when somebody else doesn't pay their taxes, it has no bearing on how much you pay. It just causes the treasury to issue incrementally more bonds. This may seem like a minor point, but it's important in understanding what taxes are really for in a country that issues its own reserve currency: they support the value of the currency by ensuring everybody needs to use it to pay their taxes.

svantana 10y ago
In the short term, yes, but long term, deficits will put an upward pressure on tax revenue, so you'll end up paying more in the end (than you would have if other people paid more taxes).
- wycx 10y ago
  Only if you are borrowing the money to fund the deficit. Public money (as opposed to bank money) is a legitimate, but ignored, alternative. See https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
  - force_reboot 10y ago
    That would cause inflation, and would cause markets to raise interest rates to account for this one they knew about the policy. Modern monetary theory is very non mainstream, flawed economics. It has a Wikipedia page, but very very few academic proponents. Check out https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory#Criticisms https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory#Criti... if you're interested in reading more criticism of MMT
    - wycx 10y ago
      Mainstream (neoliberal/monetarist) economics has abundant academic proponents and is demonstrably flawed, so I am not sure counting the number of academic proponents is much of an indicator of anything other than what is academically fashionable. In a similarly patronising way to your comment, I suggest checking out http://bilbo.economicoutlook.net/blog/ http://bilbo.economicoutlook.net/blog/ if you are interested in reading more criticism of neoliberalism and learning more about MMT than is presented on the wikipedia page.
      - force_reboot 10y ago
        You keep making assertions, but my original point in posting that reference, is that if your style of argumentation is to make assertions, and then pass the reader off to another source to verify your assertions, then all other things being equal, the source with the most academic backing is going to win. Either you directly argue the point, or you argue by authority. If you argue by authority, academia has the most authority.
sgift 10y ago
> But that is not how it works. Not for a government that can borrow at practically zero cost. "practically" zero cost is far different from "zero cost". If someone pays less taxes and the government has to issue bonds someone has to buy the bonds, so the government can get money. And who buys the bonds? Those people who have money. Who are those people? Probably those who didn't pay much tax, so they still have much money. And no one buys bonds if he doesn't get something out of it. Even low interests ("practically" zero) are far more than no interest.
- GunboatDiplomat 10y ago
  Unless the interest on the bonds is lower than inflation.
IkmoIkmo 10y ago
Not really... budget deficit as a percentage of GDP fluctuates in a century's time between -4% and +4% or so, mostly on the bottom end of the spectrum of course, and with dips down much further in rare economic crises or say a WW2. So for all intents and purposes, budget deficit rarely dips below 4%, meaning there's a cap on spending and just borrowing printed money is some infinite pool of money that's drawn from to compensate for lower taxes. No, there's a cap, and once it's reached, you either cut spending or raise taxes somewhere else. So the notion that someone else pays more taxes (or, receives a lower share of the benefits of all the programs that taxes funds), when you pay less, is not fundamentally misleading. It's mostly true, because issuing bonds is a commonplace phenomenon but it's limited. And if it's not limited to a reasonable extent, you'll turn into Zimbabwe.

by ef4 10y ago

svantana 10y ago

In the short term, yes, but long term, deficits will put an upward pressure on tax revenue, so you'll end up paying more in the end (than you would have if other people paid more taxes).

wycx 10y ago
Only if you are borrowing the money to fund the deficit. Public money (as opposed to bank money) is a legitimate, but ignored, alternative. See https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
- force_reboot 10y ago
  That would cause inflation, and would cause markets to raise interest rates to account for this one they knew about the policy. Modern monetary theory is very non mainstream, flawed economics. It has a Wikipedia page, but very very few academic proponents. Check out https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory#Criticisms https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory#Criti... if you're interested in reading more criticism of MMT
  - wycx 10y ago
    Mainstream (neoliberal/monetarist) economics has abundant academic proponents and is demonstrably flawed, so I am not sure counting the number of academic proponents is much of an indicator of anything other than what is academically fashionable. In a similarly patronising way to your comment, I suggest checking out http://bilbo.economicoutlook.net/blog/ http://bilbo.economicoutlook.net/blog/ if you are interested in reading more criticism of neoliberalism and learning more about MMT than is presented on the wikipedia page.
    - force_reboot 10y ago
      You keep making assertions, but my original point in posting that reference, is that if your style of argumentation is to make assertions, and then pass the reader off to another source to verify your assertions, then all other things being equal, the source with the most academic backing is going to win. Either you directly argue the point, or you argue by authority. If you argue by authority, academia has the most authority.

sgift 10y ago

> But that is not how it works. Not for a government that can borrow at practically zero cost. "practically" zero cost is far different from "zero cost". If someone pays less taxes and the government has to issue bonds someone has to buy the bonds, so the government can get money. And who buys the bonds? Those people who have money. Who are those people? Probably those who didn't pay much tax, so they still have much money. And no one buys bonds if he doesn't get something out of it. Even low interests ("practically" zero) are far more than no interest.

GunboatDiplomat 10y ago
Unless the interest on the bonds is lower than inflation.

IkmoIkmo 10y ago

Not really... budget deficit as a percentage of GDP fluctuates in a century's time between -4% and +4% or so, mostly on the bottom end of the spectrum of course, and with dips down much further in rare economic crises or say a WW2. So for all intents and purposes, budget deficit rarely dips below 4%, meaning there's a cap on spending and just borrowing printed money is some infinite pool of money that's drawn from to compensate for lower taxes. No, there's a cap, and once it's reached, you either cut spending or raise taxes somewhere else. So the notion that someone else pays more taxes (or, receives a lower share of the benefits of all the programs that taxes funds), when you pay less, is not fundamentally misleading. It's mostly true, because issuing bonds is a commonplace phenomenon but it's limited. And if it's not limited to a reasonable extent, you'll turn into Zimbabwe.