Excerpt: America’s top 1% enjoy a fifth of the economy’s income and pay nearly a third of its federal taxes. Many politicians think they should cough up much more. Zohran Mamdani, New York’s mayor, wants a new 2% city levy on incomes over $1m. Virginia, Rhode Island and Washington state are weighing up similar measures; Californians are likely this year to vote on a “one time” 5% levy on billionaires’ wealth. In Europe, too, there is a similar clamour to target the wealthy. France has seen a popular campaign for a wealth tax. And with Sir Keir Starmer weakened or doomed as prime minister, the left wing of Britain’s Labour Party may implement one of its own. The “Robin Hood” state, which takes from the rich to give to the poor, has obvious appeal. Governments across the developed world are strapped for cash. Budgets are burdened by legacy debts, ageing populations and the need to spend more on defence. But few politicians will countenance raising broad-based taxes at a time when voters, scarred by the high inflation of the early 2020s, are worried about affordability. Booming stockmarkets, meanwhile, have reinforced the idea that inequality is too high. And it always sounds good to say someone else will foot the bill.
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Booming stockmarkets, meanwhile, have reinforced the idea that inequality is too high
Oookay couldn’t take the article seriously after reading that.
This whole debate is completely moot. We continue to have it because people still do not understand how fiat currencies work. The US Federal government is a sovereign currency issuer. The Federal Reserve LITERALLY creates its own money. And I’m not talking about actually printing physical dollars or minting coins, I’m talking about going into a computer and typing in some numbers and, boom, money is created. The VAST majority of transactions these days do not involve any physical currency. That’s why the physical currency in circulation is significantly less than the total money that’s out there. Today, money is numbers on a computer, and we can create an infinite amount of it.
But, I know, inflation. I know. People still think that modern monetary theory is unrealistic because it would cause runaway inflation. But, modern monetary theory isn’t a theory, it’s just how money works in the 21st century. People are creating money all.the.time. and it’s not just central banks. Do you know how many crypto currencies have been created on various block chains? Millions. Millions of coins, worth trillions of dollars. But that’s just crypto, and crypto is NOTHING compared to fiat currencies, like the dollar.
I said the Federal Reserve creates its own money, and that’s true, but most of the dollar creation doesn’t actually happen at the Federal Reserve. Banks create money everyday. Every time a bank creates a new loan, they are creating money. Out of nothing. I know, people will swear up and down that banks aren’t creating the money, they’re lending out depositors money, but that’s not true. It used to be kind of, sort of true, if you squinted and looked at it just right, back when we had fractional reserve banking. Banks used to be required to hold SOME depositors money in reserves, but it was a ridiculously small amount, like 5% to 10%. As of 2020, the Federal Reserve lowered the reserve requirement to 0%, and it ain’t going back up. There’s no need for it to. Banks don’t use the money in your savings account to make loans, they just create the dang money. Banks make a loan and disperse the loan proceeds without taking the money from anywhere. Again, they don’t take the money from your savings and give it to the borrower, they just create the money. The borrower has the loan proceeds and you still have the money in your savings account that you can withdraw at any time.
That is how our monetary system works. We use debt to create money, and we use interest rates to control inflation. That works well enough for funding profit making organizations. The idea is the business will borrow the money to fund their business, with the expectation that they will generate enough revenue from their business operations to repay the money, with interest. As long as the business generates enough revenue to repay the loan, it all works ok. But this system DOES NOT WORK FOR PUBLIC SERVICES. If a public entity provides a public service, but does not charge for that service (or doesn’t charge enough), that public entity cannot repay a loan. When we force public entities to borrow money to pay for public services, we doom those public entities to taking on debt that they have no means of repaying. We could tax to repay the loans, but why do that when we could just tax to pay for the public services in the first place? Why? Because people don’t like paying taxes, that’s why. So we force public institutions into borrowing money to pay for public services, money they can’t repay WITHOUT RAISING TAXES! (or charging fees for the service, but if you have to charge a fee for a public service, it’s not really a public service, it’s just a service for those who can pay) It’s complete nonsense.
This whole thing is especially ridiculous at the Federal level. Because, again, the Federal Reserve LITERALLY creates its own money. Do you know how much the US Treasury Department owes the Federal Reserve? $4.5 trillion dollars. We have to tax people to get dollars to payoff debt, in dollars, that we owe to the institution that creates dollars. How fucking stupid is that?
There is absolutely no reason why the Federal Reserve couldn’t just create money and give it to the Treasury Department to use to fund all government services. I don’t see any reason why this would cause significant inflation. But if it did, we could raise taxes. Not to fund public services, but to control the amount of money in the money supply to keep inflation under control. But I don’t see any reason why we couldn’t just continue to use interest rates to serve that purpose. Again, when a business borrows money, it has to repay that loan at interest. During periods of higher inflation, raise rates, raising the cost of borrowing, businesses borrow less, less money creation is happening at banks, inflation slows down. And because none of this would affect public services, because public services would be funded without debt or taxes, higher rates don’t have to mean governments taking on expensive debt that they will have no way of repaying.
Not only do the rich not pay enough taxes, they are the greatest beneficiaries of taxpayer funded programs like SNAP since it allows them to underpay their employees. So we basically subsidize their gains.
Please don’t go after Smaug! He’s so misunderstood and taking a bit of gold from his gigantic pile will fix nothing.
Just go mine more gold, or maybe mithril from the Mines of Moria. Nevermind the rumors of orcs or a Balrog!
It’s not as if the rich became rich in a vacuum and then appeared in society. They used society to get rich, and the money came from literally everyone else in that society - everyone who struggles to make ends meet is struggling because the rich are hoarding their share of the money.
Please don’t tax the rich people, it’s the fault of poor old people you see and bad budgets.
Fuck off.
The economist’s credibility problems were always bad, but they went super sketchy over the last 10 years. I used to enjoy reading them. Now it’s just a clown show of billionaire penis polishers. They don’t even pretend to have objectivity anymore.
They are desperate, and its going to get a lot worse.
You can smell the desperation.
The things, nobody else can get taxed to fix the budget, and nobody is going to cut anything like the military aid for Israel.
Why not have the 1950s once more?
The premise that the people want to go after the rich ‘to fix broken budgets’ is absurd. The rich must pay their fair share. Separately many budgets can be improved, but saying one is only sought to do the other is wrong
Both the standard of living in a society and the rate of innovation are strongly positively correlated with the progressivity of the tax system. Yet we should believe the author’s unsourced “research” that supposedly proves having wealthy people live in slightly smaller mansions will dampen innovation somehow. Horseshit. Both the Netherlands and Switzerland, countries that are more prosperous and more innovative than the US, have wealth taxes (albeit not very high ones) and far more progressive income tax brackets as well (albeit not at Nordic levels).
