Hi Harpreet, I appreciate your posts and your attempts to educate people especially in relationship to Treaty principles. Keep up the good work.
To really talk about tax and what it is, you need to understand the underlying accounting and what is actually happening. Steve Keen, Richard Murphy, and Modern Monetary Theory clearly explain this. Steve Keen's models show why many current stories about the economy are simply false and leading toward a collapse of capitalism.
The key points in relationship to tax is that the government does not tax to spend. It is the opposite way around. The central bank, in New Zealand's case the Reserve Bank, creates every cent of the money that the government spends. It then taxes to remove excess money from the system. Tax gives the currency legitimacy and encourages or forces people to use it if for no other reason than to pay tax.
It does get confusing when Murphy and others of the MMT school talk about having to tax to redistribute wealth and pay for public projects. The reality is that what really inhibits government spending is available resources and not money.
How does this relate to what you are saying? I would agree with the argument that "Tax is Theft" and "Government Waste" are lies. The use of these terms are certainly aimed to have the government reduce tax primarily for the wealthy. What differs is how you build an argument and that means exploring the validity of other classical economics arguments such as the supply and demand curve. When you start exploring these and try and model their impact, you quickly discover that most classical economic arguments do not stack up.
Take the idea that banks are intermediaries between borrowers and lenders. When you try to model banking operations based on this principle, you quickly discover that it simply does not work. If you model based on the banks creating money when they issue a loan (papers from the Bank of England and the German equivalent say this is what actually happens) then you get something that actually reflects reality.
Many arguments around economics and tax are simply not based on reality. They are based on stories that have been passed from one generation to the next.
Steve Keen was one of the few economists to predict the 2008/2009 financial crisis. The reason was that his models clearly showed the instability of the capitalist economic system which Minsky had argued from his analysis of economic processes.
We should be arguing for a tax system where no one pays tax until they are earning more than the living wage. It should be progressive from there with a 100% rate on earnings over some multiple of the living wage. I have argued for 10 times reducing to 5 times over time.
However, all of this ignores living on a planet with limited natural resources where we seem content to extract more at an exponential rate. Unless we move to systems that recycle / reuse, we will reach a point where society as we know it will collapse simply because we have reached the limits of the natural / nonrenewable resources.
Thanks, Errol. I agree that many public debates about tax rest on misleading stories, and that accounting realities, money creation, and resource limits all matter. My main point here, though, is slightly different: slogans like “tax is theft” and “government waste” are politically powerful not because they explain taxes well, but because they protect wealthy interests while also resonating with people who feel overtaxed and underserved. In that sense, the issue is not just whether the economics is wrong, but how those simplifications are used to shift anger away from unfair tax structures and failing policy choices. I also agree that the real questions should be about fairness, distribution, public value, and the limits imposed by actual resources rather than treating government finance like a household budget.
Thank you for doing the kind of critical analysis that AI could never do (which is what Dr Singh has rather obviously used!). I appreciate the deeper dive and especially your last paragraph - I would add systems that regenerate to your recycle/reuse.
Hi Harpreet, I appreciate your posts and your attempts to educate people especially in relationship to Treaty principles. Keep up the good work.
To really talk about tax and what it is, you need to understand the underlying accounting and what is actually happening. Steve Keen, Richard Murphy, and Modern Monetary Theory clearly explain this. Steve Keen's models show why many current stories about the economy are simply false and leading toward a collapse of capitalism.
The key points in relationship to tax is that the government does not tax to spend. It is the opposite way around. The central bank, in New Zealand's case the Reserve Bank, creates every cent of the money that the government spends. It then taxes to remove excess money from the system. Tax gives the currency legitimacy and encourages or forces people to use it if for no other reason than to pay tax.
It does get confusing when Murphy and others of the MMT school talk about having to tax to redistribute wealth and pay for public projects. The reality is that what really inhibits government spending is available resources and not money.
How does this relate to what you are saying? I would agree with the argument that "Tax is Theft" and "Government Waste" are lies. The use of these terms are certainly aimed to have the government reduce tax primarily for the wealthy. What differs is how you build an argument and that means exploring the validity of other classical economics arguments such as the supply and demand curve. When you start exploring these and try and model their impact, you quickly discover that most classical economic arguments do not stack up.
Take the idea that banks are intermediaries between borrowers and lenders. When you try to model banking operations based on this principle, you quickly discover that it simply does not work. If you model based on the banks creating money when they issue a loan (papers from the Bank of England and the German equivalent say this is what actually happens) then you get something that actually reflects reality.
Many arguments around economics and tax are simply not based on reality. They are based on stories that have been passed from one generation to the next.
Steve Keen was one of the few economists to predict the 2008/2009 financial crisis. The reason was that his models clearly showed the instability of the capitalist economic system which Minsky had argued from his analysis of economic processes.
We should be arguing for a tax system where no one pays tax until they are earning more than the living wage. It should be progressive from there with a 100% rate on earnings over some multiple of the living wage. I have argued for 10 times reducing to 5 times over time.
However, all of this ignores living on a planet with limited natural resources where we seem content to extract more at an exponential rate. Unless we move to systems that recycle / reuse, we will reach a point where society as we know it will collapse simply because we have reached the limits of the natural / nonrenewable resources.
Thanks, Errol. I agree that many public debates about tax rest on misleading stories, and that accounting realities, money creation, and resource limits all matter. My main point here, though, is slightly different: slogans like “tax is theft” and “government waste” are politically powerful not because they explain taxes well, but because they protect wealthy interests while also resonating with people who feel overtaxed and underserved. In that sense, the issue is not just whether the economics is wrong, but how those simplifications are used to shift anger away from unfair tax structures and failing policy choices. I also agree that the real questions should be about fairness, distribution, public value, and the limits imposed by actual resources rather than treating government finance like a household budget.
Thank you for doing the kind of critical analysis that AI could never do (which is what Dr Singh has rather obviously used!). I appreciate the deeper dive and especially your last paragraph - I would add systems that regenerate to your recycle/reuse.
Tax wealth more. Tax work less