@@tropics8407 The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity) Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
You left that post, but the replies total is not updating... YOU TUBE comment system is one insidious piece of crap... Our investigations into UA-cam has collected all that you do...
Yes!! Wonderfully succinct... far better than my long winded way of saying the same thing>>>>>The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity) Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity) Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
@@StudentDad-mc3pu It's not a democracy and you can even measure that, which oddly hint at using the most basic of measures without engaging any further with the concept. For the most basic starting place: Take you 66m. Take 47m as rounded up on the electoral register. Each has 1 vote. The contribution by raw numbers alone per voter is 1/47,000,000. That's not democracy in in the first most basic analysis... If you still struggle with that concept try to consider what the definition of democracy is and note that the UK is "representative democracy" which means or used to mean "MPs" represent those voters they don't actually represent themselves in their votes either! Then note what policies even MPs actually have sway over and consider how that's diluted down signficantly also... eg Global legislation at International Level = 0 representation in effect. Put it this, people turning out and putting a ballot in a box is the veneer or the feeling of voting: That's about all it does. As such the idea that not voting is somehow bad for democracy is a fallacy: It may in fact be the most democratic thing you can do in such a system to delegitimize it for what it really is...
@@commentarytalk1446 You are VERY confused about the meaning of Democracy. I'm afraid what we have is about the best we can do. We COULD have more plebecites, like in Switzerland, which would cost a lot of money. Perhaps. We SHOULD have proportional representation, that would certainly make us more democratic. So, yes, there are improvements. But we are still a democracy. The idea that individual MP's represent the will of their electorate is just silly - because their electors have a range of opinions on just about everything.
@@StudentDad-mc3pu "more democratic" - there you go you let slip in that word salad somewhere despite all the efforts at invincible ignorance in your reply and posturing as part of such deflection. Let's try again from step 1 basic mathematics shall we: I gave you a number 1/47,000,000 as a starting number for the value of 1 vote per voter and it's even less than that with other combined factors which don't need elaboration until you concede on this first number. Remember "more or less democracy" just as you put into words above so you do have an understanding of the issue with the concept of calling UK a "democracy": You lick your lips and then say "we are still a democracy" in reply, nonetheless! As for your transitative fallacy: A = Democracy but less than B = more democracy. So in conclusion if B is democracy then A is still just less! How about this: If a cup of water is 49% full is it half full more than half full or less than half full? If it's less than half-full is it a cup still "full of water" or is it a cup which is more full of HOT AIR than water ! Try it...
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Den Danske Bank possibly has a different monetary system (not just Danske Kroner) where their crown/krone is pegged to another currency. Perhaps they almost lost control of their money. Please, any experts willing to explain?
@@AskTorin Actually the it was the public that didn't want a tax break. As part of an election manifesto the Social democrats announced that they would lower taxation. This tax break suggestion; causes massive criticism from the electorate. After which the promised tax break, was removed from the manifest. When people get good value for the tax, that they pay, then promises of tax redutions, are not always regarde as an incentive to change one's voting preference.
As a history writer, I am now interested in the histor of tax and wonder when these monetary views of tax took over from the purely revenue raising function of tax for the monarch in order to pay for his wars and castles. It's perplexing.
I'm an economics nerd who became interested in the history of economics and taxation, so I'm coming to the same destination as you are but from the other direction. The changeover you mentioned happened when we switched from a "hard" (i.e. precious metal backed) currency to a fiat currency in the mid 20th century. Before this changeover governments had to think about their budgets in much the same way that we (the citizens) did. Money was a finite resource, and so both we and our governments had to make sure that our expenses didn't exceed our incomes for too long and that we could always repay our debts or risk losing our credit rating. It was basic common-sense stuff. The arrival of fiat currency meant that there was no limit to the amount of money a government could create and spend, and so we needed a completely new paradigm to understand money and government budgets. So entered Modern Monetary Theory, which is a way of thinking about money based on the idea that money is effectively infinite and not scarce at all.
@@marcusmoonstein242 this was going to be my reply too, with the proviso that previous governments and bureaucrats realised that gold backed currency was constraining their ability to spend, in my view they realised that they were not in full financial control, once they removed that constraint they became fully in control of the creation of fiat currency, and they now fully control the supply and distribution of our fiat currency, as someone once said, control the food and you control the people, control energy and you control the nation, control the money and you control the world, and they have achieved the last two and now they are fully focused on the first, by removing farmers from the land and removing the land from agriculture, i.e. by building on prime agricultural land under the guise of housing, as the saying goes, they are not making more land
A tax ALWAYS has to happen after the event- that is when the liability arises. The order is not important. Companies also borrow first, and pay from the profits the use of capital allowed.
@@Tensquaremetreworkshop your analogy of the company (ie comparing to government) is backwards. The creditor lends to the company first, then the company repays. The company can't repay until its lent the funds. The excuse (using the analogy) would be the creditor telling the company it cannot lend to it as it hasn't yet received their payment - leading to austerity.
@@Tensquaremetreworkshop You said the order is not important, but it is important in the context of consequences. People act on their beliefs. If Rachel Reeves believes the order is tax and spend, then she concludes "if we cannot afford it we cannot do it" leading to austerity.
@@downshift4503 In accounting, the order of entries is not important, it is the result. Which order does not change. Perceptions are another matter, and require education to align with reality. Which one could argue is the main purpose of education.
You failed to mention that tax was introduced to defeat Napoleon. His regime was a meritocracy and the upper classes were not prepared to use their wealth to overthrow such revolutionary ideals. They had to keep the masses in check and so effectively got them to pay for maintaining the status quo. This is how they maintained their advantage and have continued to do so even to the present day by in building a huge unfairness into the system.
Nope- it was income tax that was introduced for this. Why? It used to be that the majority of wealth was in the hands of landowners, and that is where the money came from for wars (although poll taxes, a percentage of what everyone had, had been used. And hated). But, by the early 1800s, there was commerce and professions holding much wealth, so taxing them was an obvious step.
Just a point about inflation. Inflation can come from Aggregate Demand (AD) exceeding Aggregate Supply (AS). Moreover, inflation can be from rent seeking behaviours when there is opportunity to do so (near monopolies, cartels or cartel behaviours) as in the post covid spike or trade restrictions (Brexit). I glad you pointed out that that tax DOES NOT fund government. Just a couple of other points: 1. If the government runs a surplus then it is taking more out of the economy than it is putting in meaning that either the private sector or trade has to make up the deficit (basic accounting) 2. Government run a long run deficit that should align with long run growth to create sufficient M0 (cash and reserves) to prevent a shortage of money supply. Government gets this for free as seignorage revenue. 3. Government takes money of the economy by issuing debt (Guilts or treasuries) that can be converted by commercial banks into reserves to maintain sufficient funds to settle customer transactions through interbank settlement. If the government issues more debt and the central bank does not issue reserves base money reduces causing a shortage. 4. The reserve system and government debt are the mechanisms for monetary policy control through interest rates. They cannot control M3 directly. (I teach this stuff!)
I agree on the importance of tax but when taxes are consistently increased along side many other hidden taxes after decades of decline & chronic underfunding it is nothing short of theft & mismanagement, furthermore, when every party follows the same economic strategy how can we then call it democracy?
Inflation and its effects have been left out of the six reasons to tax... None of them can be control by the farce of so called democracy, democracy doesn't exist.. if it did, the barer bond system (Debt notes) would be outlawed.
The six reasons to tax (1) to avoid inflation (2) to force the use of currency into the economy (3) to redistribute income, and, to a more limited degree, wealth (4) to correct for costs on society (externalities) or encourage certain activities (by exempting those from tax) (5) to deliver the government’s industrial strategy by promoting some activities and discouraging others (6) to evince the power of the state and motivate the participation of the populace in democracy
I really appreciate Richard. A simple approach for understanding this. We the taxpayers know how complex our tax code is. UK may differ somewhat from the US. At least it's a start.
@@rfrisbee1 Better that I give you a reference source. How about 'Monetary theory and practice' J L Hanson. Or just about any textbook on economics. Personally, I subscribe to 'The Economist' journal, and have done for 20 years.
@@Tensquaremetreworkshop So you can't give any examples of where the presenter asserted X but in fact the truth is Y? My advice would be to not make factual claims unless you can back them up with evidence. 😉
@@rfrisbee1 I have commented on this and other of his videos. Check it out. In this one, he contradicts himself- as @shabble points out below. If you want to understand economics, listen to an economist, not an accountant.
And the seventh reason to tax is .... feed the military industrial complex (MIC) which creates jobs, helps exports and protects British hegemony overseas. It also has the unintended (some would claim "intended") consequence of killing and maiming millions of people ... Can anyone satisfactorily explain why building, staffing and maintaining two useless aircraft carriers at the mounting cost nearing £20 billion... when despite living in one of the richest countries in the world, around 3 in 10 children (4.3 million children across the UK) live in poverty. This not only inflicts hardship on children in their formative years, but also has a long-term impact on their future health, wellbeing and economic prospects. Children also face a higher risk of deeper and more persistent poverty (living in poverty for a prolonged period of time). In 2023 around 1 million children experienced destitution, the most severe form of hardship. Joseph Rowntree Foundation. PSG
@@tropics8407 In that case aircraft carriers with no aircraft will not help. Even with aircraft they are a perfect target to be sunk by submarines or missiles therefore white elephants as crew has had to be stripped from frigates & destroyers to man the damned things thus weakening the defence of said carriers (only one of which can be at sea at a time)
I would swap the order of reasons #1 and #2 since the UK government extering its tax liabilities on us to drive adoption of Sterling in public and private transactions is a pre-requisite for government spending in Sterling to begin with to require the ACTUAL tax collection back afterward (reason #1 as given).
In relation to reigning over inflation through taxation, lets not forget that real inflation would only manifest itself if there was full employment ( Labour, capital and resources) unless of course, one sets a radom 2% inflation target(thank you, uncle Milton et all). As for the wealth redistribution aspect, it would be better said the it serves to decide who gets what, meaning who gets to remain rich and who gets to remain poor.
It would be good if you teamed up with Gary Stevenson to talk about taxing the rich to curtail their impact on prices on things like real-estate & their political influence. Peter Victor also talks about taxing resource & pollution to help deal with externalities.
Why do so few people seem to watch these videos? Should there not be a series on TV explaining all this to the general public? Or would that upset the apple cart? If everyone passed a link on to five friends (or enemies) the word would soon get round. The government might even hear!
Bear with me as I get my head round these concepts! First off, in income terms the nations tax bill, including businesses, must equate to a high proportion of the money the government creates just leaving enough in the economy to meet inflation targets. The government also taxes private wealth in the form of capital gains tax, inheritance tax and tax on unearned income - all investments funded from countless previous years of largely taxed income. How do these tax receipts fit into the picture? Do they just offset income tax to manage money supply?
Hard to get your head around because much is errant nonsense. It is the sort of viewpoint that got L Truss the bum's rush. Governments tax to meet (most of) their expenditure. The gap requires issuing more bonds- IOUs that they pay interest on. Failure to redeem them on time and the currency tanks, the IMF are called in, and they force the government to mend their ways. Lenders watch the government debt to GDP ratio, as this (like a mortgagees income) is an indication of ability to pay. If it gets high, lenders demand a higher interest rate. Simples.
Capital Gains taxes also acts as a currency leakage out of the private sector, thereby reducing the aggregate demand for goods and services, and inflationary pressures. But taxing capital also serves functions to do with reducing wealth inequality and democratic accountability.
Inflation is unnecessary. You can have inflation and interest free money, through tax. While taxation does motivate use of a currency it is not the sole impulse. It’s simply ahistorical going back a couple millennia. Absent a gov money, what steps in as legal tender for debt? A bank’s notes? The paper issued by a billionaire? Corvée? Goods? Other nation’s money? At which point, national debt *is debt*. Also usury income is not earned. It’s a rent, tribute, a transfer, a tax paid to creditors for hoarding the means of exchange and I tend to think the wealthy hate taxes because denies them their sense of privilege to be takers of wealth like the people they exploit. A money is valuable *in its circulation to settle debt and in trade*. Trust in its utility matters most.
the real problem is the mobility of capital and the divergence (corruption?) of so many nations to have tax rates on capita/wealth/income ranging from ZERO% to 60% (including all the loopholes too as so many tax codes have footnotes with so many tricks). That is untenable in a world where a company or individual can just go to 0% tax country (or near it). To add insult to injury, some of these very low tax countries actually have a nicer quality of life than the almost confiscatory 50% tax rate countries!
Setting an inflation target and that determining the 'increase in money supply' (the deficit) is the wrong way around. The government runs a deficit, and targets an inflation level to absorb (part of) it.
Is there/could there be a page with a list of these videos in recommended order of viewing, with a link to each? It seems to me that this would be a significant educational resource, as well as handy to send to those who claim that the Government can't afford to make the policy changes that the UK desperately needs.
"Funding" specifically refers to nominal financing of expenditure. For instance, in order for you or I to spend Sterling cash, we first must acquire Sterling cash via our income channels. This is not true for the government since they are the ones that issue Sterling. Anybody can create credit. You can issue credit/IOU to a friend to buy their car if they accept to hold your liability. You certainly did NOT have to wait for your friend to pay you in YOUR own IOU before you could create it (by writing IOU X on a piece of paper and signing it, say) and spend it. Perhaps your friend doesn't actually want to hold your own IOU as giving up her car for it isn't worth your piece of paper. But if for some reason you were in charge of your friend and could force a tax liability on them under threat of imprisonment, then they are suddenly motivated to access your IOUs. You are offering to give your friend your IOU in exchange for their car and your friend needs your IOU to settle their tax liability to them. BOOM, the transaction takes place, your friend now has that which they need to pay their taxes, and you have the real resource (the car) that you wanted in the first place. You have used your legal authority to levy taxes on your friend to mobilise real resources to your own purpose. The tax payment didn't "fund" the spending but it was a crucial aspect of establishing demand for your otherwise worthless IOU. The above is how sovereign governments provision themselves.
The government doesn't tax to provide services, it provides services so it can tax. Inflation is a tax on saving and affects the poorer more. Best to leave the UK if you can so you dont have to live with the effects of policies that have been influenced by economists like this.
You are stating policy reasons because of those various taxes are implemented but constitutionally the Power of Levy taxes comes from the duty of supporting the public expenditure and as a rule a taxation must be proportionated to the abilty to pay and possibly progressive. There Is the problem of excise duties on petrol, oil, tabacco, the "tickets" on pharmaceuticals and Italian Nhs service which hit more poor than Rich. There Is the great problem of insufficiente welfare system contributions which are topped by public debt, which Is something improper.
Getting warm. Ask the question, how much pension debt does the state have? Ask where the trillions of pounds of wealth that the welfare state has taken gone? Ask what's your fair share of those debts? Ask if you can afford to pay that debt? Your claim of insufficient contributions is correct. People can't afford their fair share of those debts.
@@adenwellsmith6908 1. Errata corrige, "excise duties on fuels, methane gas, tabacco and spirits". 2. The welfare contrbutions (Italy) are already a whopping 40% of employer percapita expense for each employee, there Is for pensions, for severance bonus (liquidazione), workplace accidents insurance (according the sort of job), there Is another for unemployment/partial labour (cassa integrazione a rotazione or Naspi status). The consequence Is that since 30 years net real salaries don' t grow hand has risen the situation of the working poor.
Very good Richard 👍 but…. Does increasing taxation or increasing responsibility of the government improve an economy ? increase productivity ? increase efficiency ?🤔 is more government activity a good investment on a whole for the country ? 🤔
@@charliemoore2551 not from my vantage point, seems to me the more government the more rubbish. Government should stick to their narrow lane. Private enterprise is way more competent and efficient and should be in the lead.
Taxes reduce the incentives for people to work hard. Some might argue that it helps to redistribute wealth, I’d argue that wouldn’t be the case. Tax the rich is always just a slogan. For example, inheritance tax, the rich can dodge it by purchasing life insurance to pay for it, at a mere cost of % of wealth far less than the tax itself. CGT doesn’t hurt the rich because they rarely sell their assets, whenever they need cash for liquidity purposes, they will just need to borrow at a much lower cost because they all hold quality assets that can be used to secure a low rate. The rich will and can always find a way to shelter their wealth in various ways. This will only make the ever shrinking middle class suffer more and more as time goes by. Eventually it will become a reality that the society will be an M shaped society, no upward mobility. The have-nots would rather remain to be at the same level because they are “entitled” to all sorts of benefits at the expense of people with higher productivity. In the end, higher productivity individuals aren’t stupid and will leave to a better place. UK has a productivity problem, not an inflation problem. If productivity is high, inflation wouldn’t be that high, the government wouldn’t need to print money out of thin air to pay for all sorts of benefits and find ways to “tax” it back.
Yes, exactly. What do they do with the all money, they don't need? In the words of Gary's Economics (also on UA-cam) 'they buy your mum's house' and push up house prices, pricing you out of the market and pushing up the cost of mortgages, leading to increased rents! Inflation! Bad outcomes all around for all the wealth creators (workers) and long term damage to the economy, as it inhibits the creation of small businesses, which underpin the economy.
Yes, but isn’t there another important externality in these six points? Why describe taxation without taking in the asymmetry between subjects of taxation? Let’s stick to the two closest to our everyday economy - (actual) persons and incorporated entities. Should the debate about taxation be about “rich or poor people”, or about the differences in how people (all of them) and non-people (legally created subjects) can account for their assets and actions? No rich individual “sits on a pile of money” like Scrooge McDuck, obviously. If something, McDuck sits on a pile of issued credit, and just enough cash to be liquid. He is wealthy through ownership of an enterprise of different corporations, holdings, trusts, shares or government bonds - assets moving freely between all these corporate entities. The taxation of Scrooge may hit the media often (we like that), but the complex and creative accounting within his companies is a very different tax subject. What if his top corporate level is registered in Cyprus? What if his employees are registered to a UK local limited company, but all the assets are accounted for under an Irish entity? Maybe he decides to value taxable goods very low, but slap an immense IP and trade mark value to the goods evading VAT? And all the possible taxes are derived from “what’s left”, not from what “came in” like a wage? Shouldn’t this enormous and complex mechanism be part of this important clarification of taxation or general MMT? Phew…😅
Government expenditure is funded by taxation and debt issued by the Debt Management Office (plus some fees and charges). The Government's overdraft with the BoE, which is managed through the Ways and Means facility, has remained constant at £370 million for at least the last 10 years. The Government's short term cash flow requirements are managed by the DMO issuing short dated Treasury Bills. Just because an entity's income and expenditure passes through a bank account with a tiny overdraft facility, doesn't mean that entity's expenditure is funded by that facility and not funded by its income, regardless of whether the entity is a person, a business or the Government. The theoretical potential size of the overdraft facility makes no difference.
@@martinsingfield the whole lot. An individual and a business are completely distinct from a government that issues its own sovereign currency. Governments have got no income, they produce no goods nor create services they simply manage the countries assets to provide social goods. How much debt would you have if you're able to create your own currency and everyone accepted it? If you thought you needed more currency to buy a mansion why would borrow your own currency from me with interests instead of creating more currency? As you can see households and businesses don't have the same access to funds as Governments, they actually have to earn it. That's not to say that Governments can just issue currency ad infinitum , there so constraints that arise with the economy's full employment but in general don't need to tax to spend nor are domestic debts of consequence as the government can at any moment that wishes clear its domestic debt.
@@miguelaraujo1313 I didn't say that Government and individuals are the same, but merely that both use banks to pay and receive money in the same way. The fact that Government can, in theory, require the BoE to extend to it an unlimited overdraft and individuals can't, doesn't change the underlying nature of receipts, payments and overdrafts. Payments into and out of a bank account are the same, regardless of the entity which uses the account. Claims that Government is funded by money creation but individuals are not, are illogical, given that all payments from bank accounts that use an overdraft create money, and all payments that reduce and overdraft destroy money. The size of the overdraft does change this. Furthermore, the Government no longer uses it's overdraft facility (Ways and Means facility) with the BoE. If monetary financing played a role in funding expenditure, then the Government's overdraft would change over time. It has remained unchanged for at least 10 years, at a level equivalent to less than 0.05% of Government expenditure. Also, the claim that are managed so as to taxes to destroy excess money thereby avoiding inflation is ridiculous. It is the BoE that uses monetary policy to fight inflation and it has no control over taxes, which are set by the Treasury so as to fund expenditure (along with the issuance of gilts and treasury notes).
@@miguelaraujo1313 my last post seems to have disappeared! All banks create money, not just the central bank. The nature of expenditure via a bank account doesn't change with the size of the overdraft. Expenditure increases an overdraft and creates money in both a Government bank account and an individual's bank account. Receipts into a bank account do the opposite. If Government is funded by its overdraft then so are individuals, who use banks in the same way. You might as well claim that an individuals expenditure is not funded by wages, which merely serve to reduce an individual's overdraft. In reality, the Government stopped using its overdraft with the BoE (Ways and Means facility) years ago, and is entirely funded by taxation and the issuance of debt. Inflation is controlled (as far as that's possible) by the BoE using monetary policy and not by the Treasury varying taxes. So the idea that taxes are actively used to mop up excessive money and prevent inflation, rather than fund expenditure, is ridiculous.
Not even 2 minutes in the video and aready knowing it will be nonsense. "Everybody knows" that too much money causes inflation. Yeah, "Everyone" who only listens to unhinged claimes. Everybody who *looks at data* though, knows, that the amount of money never has, and most likely will, be correlated to inflation. This is a myth. There are some who say that too much money is a necessary conditon for inflation and that is a matter for discussion, but "everybody knows that too much money will for sure cause inflation" - or in otherwords, it is a sufficient condition - is pure and utter nonsense.
'Reclaim the money spent' (0:30) - or getting paid for the services provided. or charging for services. Which it needs to do to not run out of credit. Sounds very much like the funding of government spending to me. If you think the order it happens in (spend before return) is important I would love to know how. The gap between spending and income is crucial to a government (just like an individual). The gap has to be covered by issuing (more) bonds- these are bought because they pay interest (coupon) and the money is returned at the end of term. If it is not, chaos happens, the IMF is called in, and they force the government to mend their ways and stop having a deficit growing faster than their GDP can fund the increasing debt. You might try to reverse the viewpoint, but it does not wash. Government are not unique, they are just like people borrowing- with the one difference that they do not die (well, seldom) so can postpone (managed) debt repayment forever.
"The gap has to be covered by issuing (more) bonds" This is where you go wrong. Orthodox thinking on bond issuance is wrong and harks back to gold standard days and scarce reserves framework prior to 2008. The government doesn't need to issue bonds to drain currency anymore. It can just leave them in the economy as fixed price, floating interest financial assets rather than fixed interest, floating price, financial assets. Currency or bonds are the only aggregate choice the non-gov sector has with respect to holding government Sterling liabilities. One option does NOT have particularly different impacts on inflationary pressures or marginal propensity to consume. This was empirically proven with QE programmes after the GFC which effectively swapped the bonds back for Sterling and inflation remained low for a decade. There are far larger, more important components such as supply-side, bank credit regulation and government fiscal policies. Governments ARE unique. That's the whole damn point of being a government. Governments set laws and issue the chosen currency for that jurisdiction. This places them in a unique position vis a vis their economy compared with non-gov sector economic units.
The government is not funded by gilts. Gilts act as a reserve drain from previous spending. I know it isn't typically described that way, but bank operations show that it does and it is the only way it could work. Reserves must exist in the first place to be drained later. Also the government cannot be forced by the IMF unless the IMF has something that the government cannot source (what is that?). If it does something the IMF wants it is because it agrees to it.
Function of Taxation in the UK: 1. Funding Government Spending = Public Services (aka state or public sector) such as healthcare (NHS), Education (State Sector), Military For War & Defence Spending, Infrastructure Projects. Taxation is the primary source of funding for governments. 2. Taxation of Wealth Disparity = The different categories of taxation highlight this depending on salary with higher salaries contributing more to the above social services spending for the less wealthy. 3. Economic, Fiscal and Financial Factors = Investment, Consumption, Inflation, Recession, Spending dynamics influenced by Taxation. 4. Taxation on certain activities or goods = Tobacco and Alcohol (although with alcohol it's merely a way for the government to STEAL MORE MONEY off peoples' pleasures) while lower tax on initiaitves such as Green Energy can develop those technologies roll outs or higher on fossil fuels and plastics etc. History of Taxation in UK: 1. Anglo-Saxon = Geld on land to fight off Vikings. 2. Feudal System = Under Norman Rule in which peasants paid to their liege lords under "military protection". 3. Medieval Kings = Levied taxes to fund foreign wars 4. Parliament Bill of Rights = Consent system of Parliament ie power passed to Parliament (Founding of Bank Of England followed shortly after). 5. Industrial Revolution and Colonial taxes = More complex ways to tax money ostensibly for public goods. Interestingly the Magna Carta introduced the concept of "Consent of the Governed" - BUT - REPRESENTED BY PARLIAMENT. Here we now come to the crux of the issue: The aforementioned Parliament in no way "REPRESENTS" the governed today. In turn the UK Government runs a system that is fundamentally driving DEBT and DEFICIT and inevitably misuses it's powers eg bailing out the banks in 2009, or Brown selling off the nations' Gold Reserves in early-00s. It attacks the citizen via printing money and inflation and kicks the above can down the road making unilateral decisions such as the lock-down, foreign wars, spending on geo-politics and then changing policy and over-spending due to lack of consent on taxation AND spending with the governed. If looking at Taxation in the round, the only conclusion is that it's a system of power abuse by those in power which has accrued due to centralization of power over the centuries which fundamentally derives from the sovereignty of the people themselves. Not only this outcome of massive debt and deficit and misuse of power and spending aided by taxation but the system creates perverse incentives and has done so little to tackle the externalities you mention which have built up due to the indifference of the system over the decades eg climate and environment misuse: The fundamental source of wealth of nations. Taxation is at the heart of many the macro processes and patterns that dominate the lives of so many people today.
Public spending and tax receipts offset against one another. So yes tax funds spending. The consolidated fund proves it. By the way Mark Blyth professor of economics says: MMT is a closed economy Keynesianism If MMT was used to create unlimited funding for our public services, our economy would collapse.
The word UNLIMITED there is crucial. MMT is not about creating unlimited money, It's about understanding that taxation is what gives money its value in the first place, rather than the other way round. The government demand for payment of taxes in its own currency is largely what attaches value to that currency. In other words, it's not 'Supply And Demand' it's 'Demand And Supply'.
MMT isn't an argument against tax. According to you, Mark Blyth seems to think it is because according to you he says, if it were used as a source of unlimited funding for public services, the economy would collapse. He's either forgetting that tax is an essential part of that system or you've misunderstood him. Also, this talk of unlimited funding does us all a disservice. It's not unlimited funding and never will be. Keynes' argument was that "Anything we can actually do, we can afford." Anything that the capacity of our population can support, we can do. It is limited only by the size and ability of the populace.
Tax does fund government spending. It’s very simple: Tax money comes in Public spending goes out I bought a kettle on my credit card yesterday, so far I’ve paid nothing, so did create money to do it? A = no MMT is closed economy Keynesianism
Wrong... You used a credit card which makes you a money creator, the correct role for all of us, which is a power that the administrators have removed from each and every one of us... We are all able to create our own money at an individual level from at least the age of majority... Our original Titles was Master, not MR.
So get rid of tax. Instead everyone in the UK switches to the US dollar except for PS workers. How's that going to work? A simple thought experiment says you are barking Richard.
VAT and council tax are the worst taxes of all. Poorer people are badly affected by these.
Agreed and the cost of administration is very high. I think that the plain old income tax was the simplest thus the best.
And Excise Duty.
Employers Nics is an insidious levy too.
@@tropics8407 The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity)
Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
And don't forget the power of inflation that destroys both the currency and peoples lives again and again.
You left that post, but the replies total is not updating... YOU TUBE comment system is one insidious piece of crap... Our investigations into UA-cam has collected all that you do...
To give people the illusion that their efforts make a contribution.
And to give an illusion of fairness to defend the exorbitant wealth of the 1%.
Yes!! Wonderfully succinct... far better than my long winded way of saying the same thing>>>>>The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity)
Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
The only problem with these six reasons to tax? is that many of them cannot be controlled by voting and democracy. (This is an entirely false assertion, why? Because the average person does not understand the financial system and the cruel FRUAD of the barer bond system (Debt Based Currency) which is exploitative and illusionary and is used by central government to mislead and manipulate the masses into a condition of self-harm while attaching a social imperative to JUSTIFY IT. (And the Reason to do these things does not include everyone, but only those who directly benefit at the top, which means public sector and private holders of assets and equity)
Also the two party election system is simply a construct that creates an illusion of the ability/power to change things, when we all know it changes nothing, also democracy takes far too long to implement any meaningful change that would correct any wrongs to be meaningless. Sorry Richard, but without honest weights and measures and real enforcement, we cannot have a system that you propose, and we never will. The Bearer bond system (Debt based currency) Paying Debt with Debt can never work, we need a system that maintains the efforts of every single individual within the system throughout life, not just for 25 to 30 years which is what this system does. Gives with one hand and then takes away with extreme prejudice later, everyone looks the other way because they fear they will be next. This entire system is a relic and needs to be changed/adjusted at a fundamental level.
That could be addressed if we were prepared to have a government that would do it.
@@garyb455 Wealth built on unearned priviledge.
I will never not be amazed that people genuinely think we have a democracy.
Of course we have a democracy - what I think may be at issue is your expectation of what democracy can deliver in a country of 66 million people.
@@StudentDad-mc3pu It's not a democracy and you can even measure that, which oddly hint at using the most basic of measures without engaging any further with the concept. For the most basic starting place: Take you 66m. Take 47m as rounded up on the electoral register. Each has 1 vote. The contribution by raw numbers alone per voter is 1/47,000,000.
That's not democracy in in the first most basic analysis...
If you still struggle with that concept try to consider what the definition of democracy is and note that the UK is "representative democracy" which means or used to mean "MPs" represent those voters they don't actually represent themselves in their votes either! Then note what policies even MPs actually have sway over and consider how that's diluted down signficantly also... eg Global legislation at International Level = 0 representation in effect.
Put it this, people turning out and putting a ballot in a box is the veneer or the feeling of voting: That's about all it does. As such the idea that not voting is somehow bad for democracy is a fallacy: It may in fact be the most democratic thing you can do in such a system to delegitimize it for what it really is...
@@commentarytalk1446 You are VERY confused about the meaning of Democracy. I'm afraid what we have is about the best we can do. We COULD have more plebecites, like in Switzerland, which would cost a lot of money. Perhaps. We SHOULD have proportional representation, that would certainly make us more democratic.
So, yes, there are improvements. But we are still a democracy.
The idea that individual MP's represent the will of their electorate is just silly - because their electors have a range of opinions on just about everything.
@@StudentDad-mc3pu "more democratic" - there you go you let slip in that word salad somewhere despite all the efforts at invincible ignorance in your reply and posturing as part of such deflection. Let's try again from step 1 basic mathematics shall we:
I gave you a number 1/47,000,000 as a starting number for the value of 1 vote per voter and it's even less than that with other combined factors which don't need elaboration until you concede on this first number. Remember "more or less democracy" just as you put into words above so you do have an understanding of the issue with the concept of calling UK a "democracy":
You lick your lips and then say "we are still a democracy" in reply, nonetheless!
As for your transitative fallacy:
A = Democracy but less than B = more democracy. So in conclusion if B is democracy then A is still just less!
How about this: If a cup of water is 49% full is it half full more than half full or less than half full? If it's less than half-full is it a cup still "full of water" or is it a cup which is more full of HOT AIR than water !
Try it...
@@StudentDad-mc3pu You're delusional
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A paradox being; that in Scandinavia, a governmental proposals to ease taxation, nearly brought down the Danish government.
Den Danske Bank possibly has a different monetary system (not just Danske Kroner) where their crown/krone is pegged to another currency.
Perhaps they almost lost control of their money.
Please, any experts willing to explain?
@@AskTorin Actually the it was the public that didn't want a tax break. As part of an election manifesto the Social democrats announced that they would lower taxation.
This tax break suggestion; causes massive criticism from the electorate. After which the promised tax break, was removed from the manifest. When people get good value for the tax, that they pay, then promises of tax redutions, are not always regarde as an incentive to change one's voting preference.
As a history writer, I am now interested in the histor of tax and wonder when these monetary views of tax took over from the purely revenue raising function of tax for the monarch in order to pay for his wars and castles. It's perplexing.
I'm an economics nerd who became interested in the history of economics and taxation, so I'm coming to the same destination as you are but from the other direction. The changeover you mentioned happened when we switched from a "hard" (i.e. precious metal backed) currency to a fiat currency in the mid 20th century.
Before this changeover governments had to think about their budgets in much the same way that we (the citizens) did. Money was a finite resource, and so both we and our governments had to make sure that our expenses didn't exceed our incomes for too long and that we could always repay our debts or risk losing our credit rating. It was basic common-sense stuff.
The arrival of fiat currency meant that there was no limit to the amount of money a government could create and spend, and so we needed a completely new paradigm to understand money and government budgets. So entered Modern Monetary Theory, which is a way of thinking about money based on the idea that money is effectively infinite and not scarce at all.
@@marcusmoonstein242 this was going to be my reply too, with the proviso that previous governments and bureaucrats realised that gold backed currency was constraining their ability to spend, in my view they realised that they were not in full financial control, once they removed that constraint they became fully in control of the creation of fiat currency, and they now fully control the supply and distribution of our fiat currency, as someone once said, control the food and you control the people, control energy and you control the nation, control the money and you control the world, and they have achieved the last two and now they are fully focused on the first, by removing farmers from the land and removing the land from agriculture, i.e. by building on prime agricultural land under the guise of housing, as the saying goes, they are not making more land
The excuse of tax and spend, used to excuse austerity is the exact opposite of reality: which is spend and tax
A tax ALWAYS has to happen after the event- that is when the liability arises. The order is not important. Companies also borrow first, and pay from the profits the use of capital allowed.
@@Tensquaremetreworkshop your analogy of the company (ie comparing to government) is backwards. The creditor lends to the company first, then the company repays. The company can't repay until its lent the funds.
The excuse (using the analogy) would be the creditor telling the company it cannot lend to it as it hasn't yet received their payment - leading to austerity.
@@downshift4503 I think you will find, if you read it, that is what I said.
@@Tensquaremetreworkshop You said the order is not important, but it is important in the context of consequences. People act on their beliefs. If Rachel Reeves believes the order is tax and spend, then she concludes "if we cannot afford it we cannot do it" leading to austerity.
@@downshift4503 In accounting, the order of entries is not important, it is the result. Which order does not change. Perceptions are another matter, and require education to align with reality. Which one could argue is the main purpose of education.
You failed to mention that tax was introduced to defeat Napoleon. His regime was a meritocracy and the upper classes were not prepared to use their wealth to overthrow such revolutionary ideals. They had to keep the masses in check and so effectively got them to pay for maintaining the status quo. This is how they maintained their advantage and have continued to do so even to the present day by in building a huge unfairness into the system.
That's hilarious
@@AskTorin but true!
@@SteveGretheit leaves out a lot of context and misrepresents some things
You can also thank Napoleon for the number on your door. Another incredible fact! If you don't believe me, google it.
Nope- it was income tax that was introduced for this. Why? It used to be that the majority of wealth was in the hands of landowners, and that is where the money came from for wars (although poll taxes, a percentage of what everyone had, had been used. And hated). But, by the early 1800s, there was commerce and professions holding much wealth, so taxing them was an obvious step.
Just a point about inflation. Inflation can come from Aggregate Demand (AD) exceeding Aggregate Supply (AS). Moreover, inflation can be from rent seeking behaviours when there is opportunity to do so (near monopolies, cartels or cartel behaviours) as in the post covid spike or trade restrictions (Brexit).
I glad you pointed out that that tax DOES NOT fund government.
Just a couple of other points:
1. If the government runs a surplus then it is taking more out of the economy than it is putting in meaning that either the private sector or trade has to make up the deficit (basic accounting)
2. Government run a long run deficit that should align with long run growth to create sufficient M0 (cash and reserves) to prevent a shortage of money supply. Government gets this for free as seignorage revenue.
3. Government takes money of the economy by issuing debt (Guilts or treasuries) that can be converted by commercial banks into reserves to maintain sufficient funds to settle customer transactions through interbank settlement. If the government issues more debt and the central bank does not issue reserves base money reduces causing a shortage.
4. The reserve system and government debt are the mechanisms for monetary policy control through interest rates. They cannot control M3 directly.
(I teach this stuff!)
I agree on the importance of tax but when taxes are consistently increased along side many other hidden taxes after decades of decline & chronic underfunding it is nothing short of theft & mismanagement, furthermore, when every party follows the same economic strategy how can we then call it democracy?
Inflation and its effects have been left out of the six reasons to tax... None of them can be control by the farce of so called democracy, democracy doesn't exist.. if it did, the barer bond system (Debt notes) would be outlawed.
Hit the nail on the head! Exactly what's happening now. Austerity followed by more austerity.
Bravo!
Love this guy. Been sharing liike mad. Everybody needs to hear what he has to say. Most of all Rachel Reeves and Starmer!
The six reasons to tax
(1) to avoid inflation
(2) to force the use of currency into the economy
(3) to redistribute income, and, to a more limited degree, wealth
(4) to correct for costs on society (externalities) or encourage certain activities (by exempting those from tax)
(5) to deliver the government’s industrial strategy by promoting some activities and discouraging others
(6) to evince the power of the state and motivate the participation of the populace in democracy
I really appreciate Richard. A simple approach for understanding this. We the taxpayers know how complex our tax code is. UK may differ somewhat from the US. At least it's a start.
I've learnt so much from Richard I'll be a book keeper next 😂 🙌
I am sure he is ace at accounting. At economics, especially at the governmental level, not so much. Much of what he says is patently wrong.
@@TensquaremetreworkshopWithout examples that is just your opinion. Do you have *any* examples?
@@rfrisbee1 Better that I give you a reference source. How about 'Monetary theory and practice' J L Hanson. Or just about any textbook on economics. Personally, I subscribe to 'The Economist' journal, and have done for 20 years.
@@Tensquaremetreworkshop So you can't give any examples of where the presenter asserted X but in fact the truth is Y?
My advice would be to not make factual claims unless you can back them up with evidence. 😉
@@rfrisbee1 I have commented on this and other of his videos. Check it out. In this one, he contradicts himself- as @shabble points out below. If you want to understand economics, listen to an economist, not an accountant.
And the seventh reason to tax is .... feed the military industrial complex (MIC) which creates jobs, helps exports and protects British hegemony overseas. It also has the unintended (some would claim "intended") consequence of killing and maiming millions of people ...
Can anyone satisfactorily explain why building, staffing and maintaining two useless aircraft carriers at the mounting cost nearing £20 billion... when despite living in one of the richest countries in the world, around 3 in 10 children (4.3 million children across the UK) live in poverty. This not only inflicts hardship on children in their formative years, but also has a long-term impact on their future health, wellbeing and economic prospects.
Children also face a higher risk of deeper and more persistent poverty (living in poverty for a prolonged period of time). In 2023 around 1 million children experienced destitution, the most severe form of hardship.
Joseph Rowntree Foundation.
PSG
All fine and good until you get attacked by a foreign country….
@@tropics8407 In that case aircraft carriers with no aircraft will not help. Even with aircraft they are a perfect target to be sunk by submarines or missiles therefore white elephants as crew has had to be stripped from frigates & destroyers to man the damned things thus weakening the defence of said carriers (only one of which can be at sea at a time)
@@zetectic7968 yes…that is a good point
Maybe in the past.
Fantastic video.Thanks.
If there was anyone balls deep into the pockets of the City, it's this deplorable specimen
I would swap the order of reasons #1 and #2 since the UK government extering its tax liabilities on us to drive adoption of Sterling in public and private transactions is a pre-requisite for government spending in Sterling to begin with to require the ACTUAL tax collection back afterward (reason #1 as given).
Imagine thinking the ballot box matters more than evading taxes.
I got learnt. I got my brain expanded.
In relation to reigning over inflation through taxation, lets not forget that real inflation would only manifest itself if there was full employment ( Labour, capital and resources) unless of course, one sets a radom 2% inflation target(thank you, uncle Milton et all). As for the wealth redistribution aspect, it would be better said the it serves to decide who gets what, meaning who gets to remain rich and who gets to remain poor.
It would be good if you teamed up with Gary Stevenson to talk about taxing the rich to curtail their impact on prices on things like real-estate & their political influence. Peter Victor also talks about taxing resource & pollution to help deal with externalities.
Why do so few people seem to watch these videos? Should there not be a series on TV explaining all this to the general public? Or would that upset the apple cart? If everyone passed a link on to five friends (or enemies) the word would soon get round. The government might even hear!
you can help by sharing these on your social networks, I believe these videos are information everyone should know.
I will have to read that book. And great title too, because no one would read a book on tax if you didn't riff off sex.
More admiralty law being spewed.
Bear with me as I get my head round these concepts! First off, in income terms the nations tax bill, including businesses, must equate to a high proportion of the money the government creates just leaving enough in the economy to meet inflation targets. The government also taxes private wealth in the form of capital gains tax, inheritance tax and tax on unearned income - all investments funded from countless previous years of largely taxed income. How do these tax receipts fit into the picture? Do they just offset income tax to manage money supply?
Hard to get your head around because much is errant nonsense. It is the sort of viewpoint that got L Truss the bum's rush. Governments tax to meet (most of) their expenditure. The gap requires issuing more bonds- IOUs that they pay interest on. Failure to redeem them on time and the currency tanks, the IMF are called in, and they force the government to mend their ways. Lenders watch the government debt to GDP ratio, as this (like a mortgagees income) is an indication of ability to pay. If it gets high, lenders demand a higher interest rate. Simples.
Capital Gains taxes also acts as a currency leakage out of the private sector, thereby reducing the aggregate demand for goods and services, and inflationary pressures. But taxing capital also serves functions to do with reducing wealth inequality and democratic accountability.
Inflation is unnecessary. You can have inflation and interest free money, through tax.
While taxation does motivate use of a currency it is not the sole impulse. It’s simply ahistorical going back a couple millennia. Absent a gov money, what steps in as legal tender for debt? A bank’s notes? The paper issued by a billionaire? Corvée? Goods? Other nation’s money? At which point, national debt *is debt*. Also usury income is not earned. It’s a rent, tribute, a transfer, a tax paid to creditors for hoarding the means of exchange and I tend to think the wealthy hate taxes because denies them their sense of privilege to be takers of wealth like the people they exploit.
A money is valuable *in its circulation to settle debt and in trade*. Trust in its utility matters most.
'Literally everyone' can not know how tax works...
the real problem is the mobility of capital and the divergence (corruption?) of so many nations to have tax rates on capita/wealth/income ranging from ZERO% to 60% (including all the loopholes too as so many tax codes have footnotes with so many tricks). That is untenable in a world where a company or individual can just go to 0% tax country (or near it). To add insult to injury, some of these very low tax countries actually have a nicer quality of life than the almost confiscatory 50% tax rate countries!
Setting an inflation target and that determining the 'increase in money supply' (the deficit) is the wrong way around. The government runs a deficit, and targets an inflation level to absorb (part of) it.
Is there/could there be a page with a list of these videos in recommended order of viewing, with a link to each? It seems to me that this would be a significant educational resource, as well as handy to send to those who claim that the Government can't afford to make the policy changes that the UK desperately needs.
"...but none of them involve the funding of government spending."
"The first involves [funding government spending]"
"Funding" specifically refers to nominal financing of expenditure. For instance, in order for you or I to spend Sterling cash, we first must acquire Sterling cash via our income channels. This is not true for the government since they are the ones that issue Sterling.
Anybody can create credit. You can issue credit/IOU to a friend to buy their car if they accept to hold your liability. You certainly did NOT have to wait for your friend to pay you in YOUR own IOU before you could create it (by writing IOU X on a piece of paper and signing it, say) and spend it. Perhaps your friend doesn't actually want to hold your own IOU as giving up her car for it isn't worth your piece of paper. But if for some reason you were in charge of your friend and could force a tax liability on them under threat of imprisonment, then they are suddenly motivated to access your IOUs. You are offering to give your friend your IOU in exchange for their car and your friend needs your IOU to settle their tax liability to them. BOOM, the transaction takes place, your friend now has that which they need to pay their taxes, and you have the real resource (the car) that you wanted in the first place. You have used your legal authority to levy taxes on your friend to mobilise real resources to your own purpose. The tax payment didn't "fund" the spending but it was a crucial aspect of establishing demand for your otherwise worthless IOU.
The above is how sovereign governments provision themselves.
It spends our money funding diversity and inclusivity projects, that should be funding themselves.
The government doesn't tax to provide services, it provides services so it can tax.
Inflation is a tax on saving and affects the poorer more.
Best to leave the UK if you can so you dont have to live with the effects of policies that have been influenced by economists like this.
You are stating policy reasons because of those various taxes are implemented but constitutionally the Power of Levy taxes comes from the duty of supporting the public expenditure and as a rule a taxation must be proportionated to the abilty to pay and possibly progressive. There Is the problem of excise duties on petrol, oil, tabacco, the "tickets" on pharmaceuticals and Italian Nhs service which hit more poor than Rich. There Is the great problem of insufficiente welfare system contributions which are topped by public debt, which Is something improper.
Getting warm.
Ask the question, how much pension debt does the state have?
Ask where the trillions of pounds of wealth that the welfare state has taken gone?
Ask what's your fair share of those debts?
Ask if you can afford to pay that debt?
Your claim of insufficient contributions is correct. People can't afford their fair share of those debts.
@@adenwellsmith6908 1. Errata corrige, "excise duties on fuels, methane gas, tabacco and spirits". 2. The welfare contrbutions (Italy) are already a whopping 40% of employer percapita expense for each employee, there Is for pensions, for severance bonus (liquidazione), workplace accidents insurance (according the sort of job), there Is another for unemployment/partial labour (cassa integrazione a rotazione or Naspi status). The consequence Is that since 30 years net real salaries don' t grow hand has risen the situation of the working poor.
Very good Richard 👍 but….
Does increasing taxation or increasing responsibility of the government improve an economy ? increase productivity ? increase efficiency ?🤔 is more government activity a good investment on a whole for the country ? 🤔
Pretty much "yes" on all of those.
@@charliemoore2551 not from my vantage point, seems to me the more government the more rubbish. Government should stick to their narrow lane. Private enterprise is way more competent and efficient and should be in the lead.
@@tropics8407 That's been the narrative that's informed government policy for at least 45 years in the UK and it explains its decline.
The first reason you described was literally funding the government.
Taxes reduce the incentives for people to work hard. Some might argue that it helps to redistribute wealth, I’d argue that wouldn’t be the case. Tax the rich is always just a slogan. For example, inheritance tax, the rich can dodge it by purchasing life insurance to pay for it, at a mere cost of % of wealth far less than the tax itself. CGT doesn’t hurt the rich because they rarely sell their assets, whenever they need cash for liquidity purposes, they will just need to borrow at a much lower cost because they all hold quality assets that can be used to secure a low rate. The rich will and can always find a way to shelter their wealth in various ways. This will only make the ever shrinking middle class suffer more and more as time goes by. Eventually it will become a reality that the society will be an M shaped society, no upward mobility. The have-nots would rather remain to be at the same level because they are “entitled” to all sorts of benefits at the expense of people with higher productivity. In the end, higher productivity individuals aren’t stupid and will leave to a better place. UK has a productivity problem, not an inflation problem. If productivity is high, inflation wouldn’t be that high, the government wouldn’t need to print money out of thin air to pay for all sorts of benefits and find ways to “tax” it back.
So does not taxing billionaires properly raise inflation?
Yes, exactly. What do they do with the all money, they don't need? In the words of Gary's Economics (also on UA-cam) 'they buy your mum's house' and push up house prices, pricing you out of the market and pushing up the cost of mortgages, leading to increased rents! Inflation!
Bad outcomes all around for all the wealth creators (workers) and long term damage to the economy, as it inhibits the creation of small businesses, which underpin the economy.
Yes, but isn’t there another important externality in these six points? Why describe taxation without taking in the asymmetry between subjects of taxation? Let’s stick to the two closest to our everyday economy - (actual) persons and incorporated entities.
Should the debate about taxation be about “rich or poor people”, or about the differences in how people (all of them) and non-people (legally created subjects) can account for their assets and actions?
No rich individual “sits on a pile of money” like Scrooge McDuck, obviously. If something, McDuck sits on a pile of issued credit, and just enough cash to be liquid. He is wealthy through ownership of an enterprise of different corporations, holdings, trusts, shares or government bonds - assets moving freely between all these corporate entities.
The taxation of Scrooge may hit the media often (we like that), but the complex and creative accounting within his companies is a very different tax subject. What if his top corporate level is registered in Cyprus? What if his employees are registered to a UK local limited company, but all the assets are accounted for under an Irish entity? Maybe he decides to value taxable goods very low, but slap an immense IP and trade mark value to the goods evading VAT? And all the possible taxes are derived from “what’s left”, not from what “came in” like a wage?
Shouldn’t this enormous and complex mechanism be part of this important clarification of taxation or general MMT?
Phew…😅
Government expenditure is funded by taxation and debt issued by the Debt Management Office (plus some fees and charges). The Government's overdraft with the BoE, which is managed through the Ways and Means facility, has remained constant at £370 million for at least the last 10 years. The Government's short term cash flow requirements are managed by the DMO issuing short dated Treasury Bills. Just because an entity's income and expenditure passes through a bank account with a tiny overdraft facility, doesn't mean that entity's expenditure is funded by that facility and not funded by its income, regardless of whether the entity is a person, a business or the Government. The theoretical potential size of the overdraft facility makes no difference.
@@martinsingfield wrong
@@miguelaraujo1313 Which part of my response do you disagree with, and why?
@@martinsingfield the whole lot. An individual and a business are completely distinct from a government that issues its own sovereign currency. Governments have got no income, they produce no goods nor create services they simply manage the countries assets to provide social goods. How much debt would you have if you're able to create your own currency and everyone accepted it? If you thought you needed more currency to buy a mansion why would borrow your own currency from me with interests instead of creating more currency? As you can see households and businesses don't have the same access to funds as Governments, they actually have to earn it. That's not to say that Governments can just issue currency ad infinitum , there so constraints that arise with the economy's full employment but in general don't need to tax to spend nor are domestic debts of consequence as the government can at any moment that wishes clear its domestic debt.
@@miguelaraujo1313 I didn't say that Government and individuals are the same, but merely that both use banks to pay and receive money in the same way. The fact that Government can, in theory, require the BoE to extend to it an unlimited overdraft and individuals can't, doesn't change the underlying nature of receipts, payments and overdrafts. Payments into and out of a bank account are the same, regardless of the entity which uses the account. Claims that Government is funded by money creation but individuals are not, are illogical, given that all payments from bank accounts that use an overdraft create money, and all payments that reduce and overdraft destroy money. The size of the overdraft does change this. Furthermore, the Government no longer uses it's overdraft facility (Ways and Means facility) with the BoE. If monetary financing played a role in funding expenditure, then the Government's overdraft would change over time. It has remained unchanged for at least 10 years, at a level equivalent to less than 0.05% of Government expenditure. Also, the claim that are managed so as to taxes to destroy excess money thereby avoiding inflation is ridiculous. It is the BoE that uses monetary policy to fight inflation and it has no control over taxes, which are set by the Treasury so as to fund expenditure (along with the issuance of gilts and treasury notes).
@@miguelaraujo1313 my last post seems to have disappeared!
All banks create money, not just the central bank. The nature of expenditure via a bank account doesn't change with the size of the overdraft. Expenditure increases an overdraft and creates money in both a Government bank account and an individual's bank account. Receipts into a bank account do the opposite. If Government is funded by its overdraft then so are individuals, who use banks in the same way. You might as well claim that an individuals expenditure is not funded by wages, which merely serve to reduce an individual's overdraft.
In reality, the Government stopped using its overdraft with the BoE (Ways and Means facility) years ago, and is entirely funded by taxation and the issuance of debt. Inflation is controlled (as far as that's possible) by the BoE using monetary policy and not by the Treasury varying taxes. So the idea that taxes are actively used to mop up excessive money and prevent inflation, rather than fund expenditure, is ridiculous.
‘The Joy of Tax (S_X) 😂… subversion
Has this dinosaur never heard of bitcoin and its implications
Not even 2 minutes in the video and aready knowing it will be nonsense.
"Everybody knows" that too much money causes inflation. Yeah, "Everyone" who only listens to unhinged claimes. Everybody who *looks at data* though, knows, that the amount of money never has, and most likely will, be correlated to inflation. This is a myth. There are some who say that too much money is a necessary conditon for inflation and that is a matter for discussion, but "everybody knows that too much money will for sure cause inflation" - or in otherwords, it is a sufficient condition - is pure and utter nonsense.
'Reclaim the money spent' (0:30) - or getting paid for the services provided. or charging for services. Which it needs to do to not run out of credit. Sounds very much like the funding of government spending to me. If you think the order it happens in (spend before return) is important I would love to know how. The gap between spending and income is crucial to a government (just like an individual). The gap has to be covered by issuing (more) bonds- these are bought because they pay interest (coupon) and the money is returned at the end of term. If it is not, chaos happens, the IMF is called in, and they force the government to mend their ways and stop having a deficit growing faster than their GDP can fund the increasing debt.
You might try to reverse the viewpoint, but it does not wash. Government are not unique, they are just like people borrowing- with the one difference that they do not die (well, seldom) so can postpone (managed) debt repayment forever.
"The gap has to be covered by issuing (more) bonds"
This is where you go wrong. Orthodox thinking on bond issuance is wrong and harks back to gold standard days and scarce reserves framework prior to 2008.
The government doesn't need to issue bonds to drain currency anymore. It can just leave them in the economy as fixed price, floating interest financial assets rather than fixed interest, floating price, financial assets. Currency or bonds are the only aggregate choice the non-gov sector has with respect to holding government Sterling liabilities. One option does NOT have particularly different impacts on inflationary pressures or marginal propensity to consume. This was empirically proven with QE programmes after the GFC which effectively swapped the bonds back for Sterling and inflation remained low for a decade. There are far larger, more important components such as supply-side, bank credit regulation and government fiscal policies.
Governments ARE unique. That's the whole damn point of being a government. Governments set laws and issue the chosen currency for that jurisdiction. This places them in a unique position vis a vis their economy compared with non-gov sector economic units.
The government is not funded by gilts. Gilts act as a reserve drain from previous spending. I know it isn't typically described that way, but bank operations show that it does and it is the only way it could work. Reserves must exist in the first place to be drained later.
Also the government cannot be forced by the IMF unless the IMF has something that the government cannot source (what is that?). If it does something the IMF wants it is because it agrees to it.
Function of Taxation in the UK:
1. Funding Government Spending = Public Services (aka state or public sector) such as healthcare (NHS), Education (State Sector), Military For War & Defence Spending, Infrastructure Projects. Taxation is the primary source of funding for governments.
2. Taxation of Wealth Disparity = The different categories of taxation highlight this depending on salary with higher salaries contributing more to the above social services spending for the less wealthy.
3. Economic, Fiscal and Financial Factors = Investment, Consumption, Inflation, Recession, Spending dynamics influenced by Taxation.
4. Taxation on certain activities or goods = Tobacco and Alcohol (although with alcohol it's merely a way for the government to STEAL MORE MONEY off peoples' pleasures) while lower tax on initiaitves such as Green Energy can develop those technologies roll outs or higher on fossil fuels and plastics etc.
History of Taxation in UK:
1. Anglo-Saxon = Geld on land to fight off Vikings.
2. Feudal System = Under Norman Rule in which peasants paid to their liege lords under "military protection".
3. Medieval Kings = Levied taxes to fund foreign wars
4. Parliament Bill of Rights = Consent system of Parliament ie power passed to Parliament (Founding of Bank Of England followed shortly after).
5. Industrial Revolution and Colonial taxes = More complex ways to tax money ostensibly for public goods.
Interestingly the Magna Carta introduced the concept of "Consent of the Governed" - BUT - REPRESENTED BY PARLIAMENT.
Here we now come to the crux of the issue: The aforementioned Parliament in no way "REPRESENTS" the governed today.
In turn the UK Government runs a system that is fundamentally driving DEBT and DEFICIT and inevitably misuses it's powers eg bailing out the banks in 2009, or Brown selling off the nations' Gold Reserves in early-00s. It attacks the citizen via printing money and inflation and kicks the above can down the road making unilateral decisions such as the lock-down, foreign wars, spending on geo-politics and then changing policy and over-spending due to lack of consent on taxation AND spending with the governed.
If looking at Taxation in the round, the only conclusion is that it's a system of power abuse by those in power which has accrued due to centralization of power over the centuries which fundamentally derives from the sovereignty of the people themselves.
Not only this outcome of massive debt and deficit and misuse of power and spending aided by taxation but the system creates perverse incentives and has done so little to tackle the externalities you mention which have built up due to the indifference of the system over the decades eg climate and environment misuse: The fundamental source of wealth of nations.
Taxation is at the heart of many the macro processes and patterns that dominate the lives of so many people today.
Public spending and tax receipts offset against one another.
So yes tax funds spending.
The consolidated fund proves it.
By the way Mark Blyth professor of economics says:
MMT is a closed economy Keynesianism
If MMT was used to create unlimited funding for our public services, our economy would collapse.
The word UNLIMITED there is crucial. MMT is not about creating unlimited money, It's about understanding that taxation is what gives money its value in the first place, rather than the other way round. The government demand for payment of taxes in its own currency is largely what attaches value to that currency.
In other words, it's not 'Supply And Demand' it's 'Demand And Supply'.
MMT isn't an argument against tax. According to you, Mark Blyth seems to think it is because according to you he says, if it were used as a source of unlimited funding for public services, the economy would collapse. He's either forgetting that tax is an essential part of that system or you've misunderstood him.
Also, this talk of unlimited funding does us all a disservice. It's not unlimited funding and never will be. Keynes' argument was that "Anything we can actually do, we can afford."
Anything that the capacity of our population can support, we can do. It is limited only by the size and ability of the populace.
@@debbiegilmour6171 Here here!
Tax does fund government spending.
It’s very simple:
Tax money comes in
Public spending goes out
I bought a kettle on my credit card yesterday, so far I’ve paid nothing, so did create money to do it?
A = no
MMT is closed economy Keynesianism
So where did the money come from to pay the very first tax?
You didn't learn anything did you?🤦♂️
Fool comparing a credit card to the economy 🙄
Wrong... You used a credit card which makes you a money creator, the correct role for all of us, which is a power that the administrators have removed from each and every one of us... We are all able to create our own money at an individual level from at least the age of majority... Our original Titles was Master, not MR.
@@rfxtuber I haven’t created money, it’s just the time lag in the system
Just like the consolidated fund, the govt current account
So get rid of tax. Instead everyone in the UK switches to the US dollar except for PS workers.
How's that going to work?
A simple thought experiment says you are barking Richard.
Troll!