Lifted out of Participation
I’m no economist so I’m keeping this excursion simple.
Is it really better to lift people out of paying tax? It sounds like a desirable policy goal on the surface: of course you want to keep as much of your money as possible, but it makes no sense in the general and especially current context. Aside from the wider philosophical arguments about the responsibility and size of an ideal government and, leaving out that conveniently seldom-mentioned elephant – the ability to print a sovereign currency as necessary – isn’t the excuse for limited Government spending usually blamed on the revenue-capacity of the Treasury? That same Treasury that is so starved of income that it’s keen to also ‘lift’ the biggest and the richest out of tax?
So, lack of revenue being the narrative, how does it help the national economy if a growing number of people pay no tax because they can only find part-time, short-term, zero-hour contracts and the like? Part-time work is ideal if you only require part-time wages, but underemployment doesn’t keep the roof over your head and feed your family. It doesn’t cover your bills and it certainly doesn’t make you feel safe. It puts you in almost constant survival mode and this engenders anxiety, hopelessness and resentment because desire and effort are made to seem almost redundant. So, because the underemployed employee can’t earn enough to even cover life’s basics, we know that financial assistance is required from the State.
Suddenly, through a variety of top-up benefits, you are beholden to all the lucky, tax-paying public and, to add insult to the injurious and carelessly laid policy traps, you are generically and fatuously labelled as a ‘scrounger’ who must have some terrible moral deficiency. You are now a gratuitous drain on some fictionalised hard-working majority. Ironic considering how very few people would knock back a chance to genuinely improve their lot if real improvement was on offer.
Maybe, as some will tell you, part-time work, temporary and zero-hour contracts are sneaky economics and avoidable. I suspect this is largely true and quite curable with sufficient and appropriate investment in our common needs, such as infrastructure, public services, housing, science and technology (especially green). In such progressive and abundant circumstances, employees may even see their personal and collective value being more highly respected and rewarded – sufficiently to pay tax.
Maybe, as others will tell you, this epidemic of underemployment is just the consequence of our modern economy to which we must adjust. If this is true then we need to urgently and seriously find ways to make life affordable on minimum hours and minimum wages.
Lifting people out of tax is symptom-based popularism – a convenient way of ignoring the larger reality: we wouldn’t need so much money if it didn’t cost so damned much to live.
There is another issue around this seeming gift of tax exemption which underpins my philosophical view: that renowned concept of ‘no taxation without representation’. Tax contributions are as much a citizen’s way of participating in the running of their country as is their vote. It actually anchors the citizen’s vote by virtue of the State’s need for the contribution as a vehicle of that representation. Thus we derive our right to have a say in a democratic system.
Liked your nicely put blog but it all falls down when you realise that a gov’t does not need taxes to be able to fund what it wants. It just changes numbers in accounts. When you send your cheque for income tax you just see your account changed down. You may be lucky to have your contribution “recorded” in some other obscure account. Nothing reaches the treasury though,that they could reuse as spending(funding). So why tax in the first place? Well your salary just dropped by 33% and you can’t afford to buy that new car.
SEVEN DEADLY INNOCENT FRAUDS OF ECONOMIC POLICY
Question: If the government doesn’t tax because it needs the money to
spend, why tax at all?
Answer: The federal government taxes to regulate what economists call
“aggregate demand” which is a fancy word for “spending power.” In short,
that means that if the economy is “too hot,” then raising taxes will cool it
down, and if it’s “too cold,” likewise, cutting taxes will warm it up. Taxes
aren’t about getting money to spend, they are about regulating our spending
power to make sure we don’t have too much and cause inflation, or too little
which causes unemployment and recessions.
Click to access 7DIF.pdf
As juli says tax ” actually anchors the citizen’s vote by virtue of the State’s need for the contribution as a vehicle of that representation.”
Thank you for explaining the economics, Sue. That is exactly my point (that and the illogical use of top-up benefits to plug the gap between wages and the cost of living) Like I said: “I’m no economist!”
Pleasure .. good post Juli 🙂
Yes, I appreciate your wider point but I deliberately framed my opinion in terms of the widely accepted and established system of tax revenue being the acknowledged method of revenue collection and how it ‘anchors the citizen’s vote by virtue of the State’s need for the contribution as a vehicle of that representation’. That is important to me. If the country and/or Govt wants to discuss the abolition of tax altogether why then, what’s stopping them or it?! 🙂
Oh! Dear, the problem is you are not an “informed Economist” juli is right in what she said & I’m glad she quoted Warren Mosler. This is the simple way of stating why “TAX” is misunderstood. but the wider picture of why Gov’t won’t discuss the subject is also a bit more difficult.
To keep it as short as possible. It depends on which wing of politics you perch on. If you are RIGHT wing then you take the view that gov’t should not be involved in the “FREE MARKET” that this market should be run for the purpose of PROFIT to a few. If you are perched on the LEFT wing of politics you take the view that Gov’t should be involved in all areas of the Economy that do NOT touch upon another countries CURRENCY. Because Gov’t funding is then FREE. this makes the Project funded as best value (you can’t get better than FREE. this is shown in the now discredited PFI contracts.
In PFI contracts Gov’t was told “there was no money left” this was plain Nonsense. But as most MPs are not Informed Economists they believed there was no money left. So they were pleased when someone said WHY don’t we fund this “hospital” with Private Money? Well the why you must Not is because if you use private money you have to make interest payments until you repay the CAPITAL this makes the “HOSPITAL” vastly more expensive.
So there you have it. I think the left wing policy is much the best way to go. AS AN Accountant &ECONOMIST. it is the most honest. As you don’t have to tell Porky PIES like”there is no money left” & asking “How else are you going to pay for it”. You are also reducing Unemployment when Gov’t Funds a project. You are also creating UNemployment when Gov’t stops Funding Projects. This is shown when you look at what GDP is made up of. It INCLUDS Gov’t Spending. this alone makes GDP a failed calculation. However when you Know that it also EXCLUDS “The Black(cash) ECONOMY” and the whole Banking (Shadow) ECONOMY then GDP becomes a NONSENSE. that is why Britain has fairly low UNEMPLOYMENT and yet is bumping along dipping into Low GDP figuares. The Gov’t by not Funding projects is causeing the low GDP
Wonderfully written as usual, Juli! A very interesting post, with good points!
Excellent post, well explained and funny.
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