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Truth about taxes.

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    lonely bird, if we cut the payroll tax we can direct Treasury to make our payments to the Soc Sec and Medicare Trust Funds. That's what was done with the Obama payroll tax cuts that were phased out. There's probably a better way to fund Soc Sec and Medicare without all the budget shenanigans, but that's for another post. For more info on this topic, please check out Stephanie Kelton's short but sweet article at the link below. She was a Sanders appointee as Chief Budget Economist for the Minority on the Senate Budget Committee and now she is a principle economic adviser for the Sanders' presidential campaign. I urge all Democrats to vote for Senator Sanders on the basis of his allies and economic advisers which include Kelton, Bill Black, and Randall Wray, all prominent progressive MMT activists. Under a Sanders presidency, we could have a Revolution for Public Purpose.

    neweconomicperspectives.org/2011/04/4-t...

    The government is always the price monopolist at the margin for its currency. So the prices it pays inexorably sets or validates the price level for things that we buy or sell, including our own labor.

    Simple game theory shows that labor is not a fair game, as workers must work to eat, but business will only hire when it is profitable to do so. - Warren Mosler (one of the most successful hedge fund managers in American history on the basis of returns to customers and a former Democratic candidate for the U.S. Senate in Connecticut and whom I invited to speak with Occupy Dallas in 2012).

    Without support (from the government) wages will trend to very low subsistence levels. Set at a living wage, the ELR would provide the support to prevent wages in the private sector from trending below that living wage level. Meanwhile, it adds and improves upon the quality and quantity of our labor force, eliminates many societal evils, and provides the macro economy a self-regulating mechanism.

    With an ELR in place, taxes regulate the size of the pool of workers in ELR jobs. We always would have full employment. The question then and what taxes would regulate is the composition of the total employment.

    You are correct in recognizing a problem with cutting taxes forever; but theoretically, you could have negative taxes, provided you required people to present a tax payment that they were subsequently reimbursed for; and some other conditions. So if I'm the government and I say if you give me $10, I will give you $15, you need to get the $10 from somewhere to get the $15 from me. So the "demand" for the currency created by the tax is still there; but in order for that to work or be required to regulate demand higher, we would need ridiculous demand leakages, i.e. propensities to save, or there would be massive inflation that would hyperinflate the currency and necessitate larger taxes or end in some revolt against the government.

    When you cut taxes on working people with high propensities to spend in the first instance, the resulting economy activity is going to generate new tax revenues that replace some of the revenues from the taxes cut. If it did not, then the tax cut would have all been saved and not spent by definition. This is why tax cuts and tax increases on the wealthy don't work that well to regulate aggregate demand; because so much of their earnings is devoted to savings. The tax cuts or increases on the rich have to be more dramatic. Ideally, we don't have to use taxes to regulate rich people (prevent massive build up funds used to buy elected officials, etc); but we regulate how people become rich in the first place and stop all the government support for rich people that is for no public purpose.

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    Chet, there is too much to unpack here.

    All I'm talking about is that as a matter of logic, scorekeepers have to distribute "points" first before they can collect them from players. When you play the game Monopoly, the "Monopoly Bank" cannot receive any funds from you, until it has distributed those funds first. The funds come from the "Monopoly Bank" which is analogous to a consolidated central bank-government treasury department. The "Monopoly Bank" has a monopoly over the "Monopoly" currency. It's the same with the U.S. currency; the government has to spend or lend the currency first, before any players can pay their taxes or purchase government securities (government debt).

    So any talk that taxes need to go up in order for the government to acquire funding for more government spending is completely counterproductive and false. Schmidt recognizes that, but struggles with reconciling this into Democratic politics.

    In any event, if you are interested in what I'm saying but have questions: please read Warren Mosler's 2010 book first. It's free. It's short. It's written for a lay audience. Warren has a gift for keeping it simple. I can help you with specific questions, but you first need to read the book.

    moslereconomics.com/wp-content/powerpoi...

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    Carlitos, My proposal about taxes is two fold. Use it or lose it. First I ppropose very high deductions even 100% for money used to capitalize old or new long term product producing jobs and iideas along that line. Then I would put corresponding high taxes and immunity from deduction laws on speculative third party trsnsactions. All the tax changes would be aligned to award production jobs and penalize gambling. Formulate the effort toward stable hard products. This would produce a massive resurgence in jobs, community income and income tax revenue. The net effect on wealth would be lateral but wealth would be ownership of jobs producing industries instead of balance sheets. Inflation would have no major effect because prosperity would increase at an increasing rate the spending and spending power of a huge segment denied discretionary money for over 3 decades. Money woulf have real value and utility because of the increase in velocity .

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    That's kind of the design already. Businesses are taxed on net-income. If they put more revenues towards investment, their net-income is lower and they pay lower taxes.

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    I am talking about a tax deduction not income adjustment. Maybe vague but the fundamental is to increase the velocity of money by moving it from securitizing to capitalizing. Stock ownership could lead to zero taxes. Make derivatives useless by returning futures to true price and supply protection of sensitive commodities pre year 2000 definition of futures.

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    If you want to increase the velocity of money, put more money in the hands of those most likely to spend it. That means those with the lowest propensities to save and the highest propensities to spend, e.g. poor and working people. That's what a payroll tax cut would do, and that's what Bernie Sanders' total net-spending plans would do.

    Consumers run this thing. Capitalism runs on sales. You are focused and all over the place on supply side stuff. That's the wrong way to attack an aggregate (bleeping) demand problem and history shows it to be the case. More than any other factor demand leads investment, not taxes or interest rates or regulatory changes.

    Just get the dollars in the hands of working people so they can buy the stuff they produce with their labor.

    Democratic constituencies, i.e. the poor, middle class, and seniors, deserve tax cuts and more government spending for public purpose that improves their lives, and we don't have to raise revenue by taxing rich people to get the funds to do it.

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    You get money in the hands of the people that will spend it by giving them jobs that create income and discretionary income. You do that by invigorating an economy. You invigorate an economy by getting the trillions of dollars securing the derivative market back into the economy. That is done by target taxing derivatives out of existence. Roll back futures definition to pre 2000 and penalize tax everything declared a futures after that. Tax at a penalty rate any trading exceeding capacity of a working person. Any trading done at a level above a working person is for generating income and serves no purpose.

    I am not proposing taxes as an income but for investing in brick and mortar businesses. Rewarding jobs investing with tax credits. Not unlike the credits low income qualify for but determing qualifications by investments. I have no problem with people making money and getting rich. That is how accomplishments happen. My problem is with willful stagnation of money. There is no politically correct way of putting money in the hands of people that will spend it. Directed taxation is the only way of returning money to an economy. Predatory financing serves no purpose other than generating an income. That contributes to taking money out of the economy. Especially in the case of student loans that finance low return degrees. The income from those people will mostly service their loan debt, taking more and future money out of the economy. Annuities are creating the world we live in.

    BTW Several years ago Warren Buffet said to put money in the hands of people that will spend it. I wanted to quote him but an internet search will not turn that up.

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    This thread was started in the spring of 2016, when Trump was still trailing badly in the polls.

    Less than a year after he got elected, he managed to pass a huge tax cut that largely benefited corporations and wealthy people.

    As article in the morning New York Times illustrates, once again, why tax cuts simply do not work - and Kansas is exhibit #1.

    Spending cuts are enormously harmful to the people who rely on government services and the public workers who lose their jobs. In a recession, cuts also damage the broader economy, causing layoffs to ripple through the community.

    When you fire a teacher, you harm her family and her. But you also harm the local grocery store where she shops, and all the other people and businesses she gives money to.

    Using conservative estimates, these ripple effects mean that each dollar of spending the state cuts leads to a drop of at least $1.50 in the gross domestic product, and there are reasons to believe that the drop is as much as $2.50. With state budget shortfalls forecast to approach $300 billion this fiscal year, a spending-cut-only approach to balancing state budgets will cause at least a $450 billion reduction in G.D.P.— more than 2 percent.

    Tax increases, especially on high-income people who aren’t living paycheck to paycheck, are much less economically damaging, costing the economy only around 35 cents for every dollar raised. States and localities that raise taxes on the rich to increase spending will create at least $1.15 of economic activity for every dollar raised, and most likely closer to $2.15 or more.

    This at a time when education funding should be expanding. The Trump administration’s failure to control the pandemic has made it impossible in most places to safely open schools at current funding levels, but large budget increases to support smaller class sizes, building retrofits and other innovations could make it possible for kids to attend classes in person rather than on the computer. Instead, many districts are shuttering buildings and laying off teachers and other staff members.

    Some states, and their voters, are taking bold action. Oklahoma and Missouri just voted to expand Medicaid by ballot initiative. Arizona voters will decide in November on an ambitious plan to raise more than $900 million a year for education through a 3.5 percent income tax surcharge on the top one percent of Arizonans.

    https://www.nytimes.com/2020/09/03/opinion/sunday/progressive-policies-taxes.html?action=click&module=Opinion&pgtype=Homepage

    The amount of U.S. government debt has grown to nearly outpace the size of the nation’s economy in the 2020 fiscal year and is set to exceed it next year, as the virus downturn saps tax revenues, spurs government spending and necessitates record amounts of federal borrowing, the Congressional Budget Office said on Wednesday. Federal debt, as a share of the economy, is now on track to smash America’s World War II-era record by 2023.

    The turnabout on deficit fears caps several years of declining concern over Washington spending more than it takes in, particularly among Republicans. Lawmakers voted along party lines in 2017 to pass a $1.5 trillion tax cut that President Trump and Republican leaders insisted would pay for itself but has instead added to the deficit. The budget deficit surpassed $1 trillion in 2019 — before the coronavirus pandemic hit — a jump of 17 percent from 2018 as tax cuts and spending increases continued to force heavy government borrowing.

    The deficit — the difference between what the United States spends and what it earns through taxes and other revenue — is expected to reach $3.3 trillion for fiscal year 2020, the budget office said on Wednesday. That is more than triple the level it reached in the 2019 fiscal year.

    But it has been decades since the amount of federal debt was larger than the sum of the nation’s annual economic output. That came in 1946, shortly after the war ended.

    In a separate report released on Wednesday afternoon, the budget office updated its forecasts for the solvency of the Social Security Trust Fund, showing it will run out of money faster than the office previously forecast in June.

    The new estimates imply the fund will be exhausted by 2031, a year earlier than previously projected, forcing immediate benefit cuts, unless lawmakers intervene. Medicare’s hospital insurance trust fund is now on track to run out of money in 2024, instead of 2026. Trump's plan to cut the payroll tax would make both of these situations worst.

    While Trump, as a candidate in 2016, famously pledged to pay off the entire national debt in eight years, he and his fellow speakers during this year’s Republican National Convention did not raise the deficit issue at all. Mr. Trump’s most recent budget proposal, offered before the pandemic spread rapidly in the United States, did not include a balanced budget even if he were to win re-election.

    https://www.nytimes.com/2020/09/02/business/us-federal-debt.html?action=click&module=Latest&pgtype=Homepage