Saturday, January 23, 2016

Bruce Wilder 12.01.15 at 9:46 pm

Part of the fiscal underpinning of a fiat currency is being able to collect taxes. The short answer to what to optimally tax is Henry George: tax economic rents, which are, after all, arguably the secure portion of incomes dependent on the rule of law.

Back in the bad old days (irony intended) 1947-71, the U.S. collected a corporate income tax that was in large part a tax on economic rent. It was an implicit constraint on rentiers and, along with local property taxes, allowed the government to earn a return on those public investments that contributed to general economic growth. It also contributed to the honesty of corporate financial reporting and the stabilization of corporate finance (since the corporate income tax was refundable against subsequent losses).

Of course, the corporate income tax is in tatters, notoriously avoided by many of the most profitable companies. We are regularly told that efficiency demands more consumption taxes. Like the poor and the middle classes are not screwed enough already. When financial fraud creates mountains of bad debt, that bad debt must be converted into full faith and credit obligations of the government, funded by consumption taxes. But, the economic rents that show up in the corporate profits or the incomes of hedge fund managers or the capital gains of billionaires — those are untouchable. State-funded education must be privatized, the funds channelled thru Charter Schools and Higher Education, which was once heavily subsidized by the States is now financed by debt loaded onto the students — well that half of the student population whose parents cannot afford to pay (welcome to the class system 3.0)

We have secular stagnation, because secular stagnation is policy. Technology is not a devil that made us do it, nor did Technology and Globalization do it to us with the supreme indifference of Trends. This was something chosen for us by our Masters.

The value of money depends now on doubling down on predatory and parasitic taxes. It is the monetary equivalent of, Soylent Green is People.

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