4 ms·
The general goal of all the windfall taxes I've seen proposed is precisely that the money used goes back to ordinary people so it can be spent instead of suppos
by makomk 4y ago
The general goal of all the windfall taxes I've seen proposed is precisely that the money used goes back to ordinary people so it can be spent instead of supposedly being wasted sitting around in the bank accounts of the super-rich. This does not, of course, actually help with the underlying problem that there is too much money chasing too few goods and services - it has the opposite effect by increasing the amount of money whilst disincentivizing companies from trying to expand production. In order to use tax to take out excessive money supply, that tax needs to come out of the pockets of ordinary workers and consumers who'd otherwise spend the money buying stuff, either through an increase in income tax or sales tax/VAT. Usually I think income tax would be used. This is incredibly politically unpopular and an election-loser since people see that the government is taking their money whilst they can't afford stuff and some corporations are making big profits.
- js8 4y agoWhy would giving ordinary people disincentivize companies from expanding production? Quite the opposite, people now have extra money to spent, so they should get the loans going for investment expansion! The last sentence is exactly why you need to tax the big owners and corporations and not the workers, because they control most of the additional money supply in the profit-driven inflation. (That being said, and as was noted, of course government can also run a surplus with the windfall tax, and that takes the money out of circulation entirely. However, as I explain above, inflation can be more complex, it might be money oversupply in only parts of the network, not the whole network.)
- wizofaus 4y agoI assume GP meant the act of imposing windfall taxes - if you know for certain that x% of your profits will be eaten up in taxes, but you can only make some sort of rough guess at how much more demand there might be as a result of cash handouts etc., there's probably not a great motivation to expand production.
- js8 4y agoIsn't that just restating a (probably) truism that investment into financial bubbles tends to be easier than expanding real production? Where does the extra profit go (in the absence of windfall tax)? I doubt it goes to expanding production, because without windfall tax, you won't see demand change (and, btw, with windfall tax you don't have to estimate, you will directly see customers having more money to spend). So it will go into stock buybacks, real estate and other ways to inflate asset bubbles. These are seemingly easier ways to park money than to make actual real investment decision of expanding certain production.