Thread by @DeficitOwls

What is Modern Monetary Theory's take on the wealth tax proposals? Let's review some basics.

First, a reminder that you don't have to be a left-winger to support MMT and not all MMTers are (though I have heard many MMTers express approval of the idea). (1/)

Next, what would a wealth tax be for?

Since this would be a federal tax, and the US federal government is a monetary sovereign, this tax would have ONE purpose only: to make rich people have less money. (2/)

Should we have a wealth tax?

It depends: do you think rich people have too much money? You might say yes if you think that the political power rich people have accumulated is bad for democracy, and that inequality is out of control. Or, you might say no if you think they've (3/)

earned it fair and square, and have a right to keep it.

(What is @DeficitOwls's opinion? The answer is [***redacted***])

But the point of the tax would be to fight inequality and concentrations of power, NOT to raise revenue. The amount of revenue collected is immaterial. (4/)

Why is revenue immaterial? Can't the government use that money to help poor people?

https://twitter.com/Noahpinion/status/1088705516648333313?s=20

The answer is - no! (5/)

If we want to enact programs for poor people, the government already has all the money it ever needs. If you issue your own currency, you don't need taxes to "get money," you already have money. Taxes do not affect how much money the government has. (6/)

What taxes do is prevent inflation. If the gov taxes you, and this causes you to buy fewer goods/services, then this frees up those goods (or the labor that would have produced them) so that the gov can buy them without competing against you and bidding up prices. (7/)

And sad but true, taxes on rich people don't do a whole lot to fight inflation. The goal of an anti-inflation tax is to get people to buy less stuff, to spend less money. But if you give $100 to Jeff Bezos he's much less likely to spend it than if you gave it to a poor family (8)

What that means is that taking away that $100 from Jeff Bezos is not likely to have a significant impact on how much stuff he is buying. It doesn't reduce consumption, therefore it doesn't free up resources for the government to purchase, therefore it can't fight inflation. (9/)

So, taking money from rich people (unless it's a huge proportion of their money), DOES NOT make us financially more able to give money to poor people! It doesn't provide "needed funds" to the gov, nor does it create fiscal space for the gov to spend more before inflation. (10/)

Therefore, the amount of revenue the tax brings in is immaterial. To favor an inequality-fighting tax based on how much revenue it brings in, apart from its effects on inequality, is to miss the point. (11/)

In fact, in an ideal world - that is, a world without inordinate inequality or concentrations of power - a well-designed wealth tax would probably bring in ZERO revenue. Because there would be no obscenely-rich people to tax. (12/)

Why is the MMT way of thinking better? First, it's the truth. The idea that we're taking money from the rich to give to the poor is actually just false. Second, it prevents potential mistakes. For instance, suppose that we actually solved the inequality problem (that is, (13/)

created a wealth/income distribution that people generally viewed as fair), and that this reduced the wealth tax revenue to zero. If we believed that we needed that revenue to help the poor, our leaders would be strongly tempted to continually lower the threshold, to try to (14/)

keep revenue up, not realizing that they were now exacerbating the problem in the opposite direction.

Conclusion/tl;dr: we don't need rich people's money, but we might want them not to have it. (Fine.)