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"No, the point of tax is to forceable take money to redistribute in the best interests of society at large." That's not how (federal) tax works in a fiat money
by alvah 4y ago
"No, the point of tax is to forceable take money to redistribute in the best interests of society at large."
That's not how (federal) tax works in a fiat money environment (i.e. in Western countries for at least the last 50 years), despite what the textbooks, media and political parties tell us. Taxes (and other measures) are used to control the level of spending in the economy. Government expenditure is funded by money created by government-controlled and / or government-adjacent agencies.
- lll-o-lll 4y agoSounds complicated. Can this be decentralised within a federal system or does its very nature imply that power is coalesced to federal gov + these agencies to which you refer? Also, why does there appear to be a correlation between countries that tax more and higher public services (like the Nordic countries vs US). Is it actually just an artificial correlation? Also, when you say spending, is this gov spending or private spending? Obviously if my tax goes up, I’m spending less. Sorry for all the Q’s, genuinely curious.
- alvah 4y agoModern Monetary Theory covers some of the basics. I believe Monetary Realism (https://www.pragcap.com/monetary-realism/ https://www.pragcap.com/monetary-realism/) is a much better attempt to explain the roles of government, banks, taxation and spending in the modern-day fiat currency environment (though it does contradict some of my simplifications above).
- alvah 4y ago"Also, when you say spending, is this gov spending or private spending?" Private spending, though the theory is coupled with the idea that government spending should increase to take up the slack when private spending declines.
- lll-o-lll 4y agoThanks for all this. Looks like I have some reading to do. On a side topic, is there much hope for devolution of power in our current political systems in the West in your opinion? I’m Australian, but would be interested in your take on any western country.
- alvah 4y agoI'm Aussie too, but I'm not optimistic about the political direction in any Western country.
- alvah 4y ago"Can this be decentralised within a federal system" Money creation is central to the concept, and I don't believe there is currently an advanced economy where money creation is devolved to the state level.