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On March 18, Joe Wiesenthal of Bloomberg Markets had MMT economist Stephanie Kelton on the show. If you’re not familiar with MMT, they think governments should print more money because deficits aren’t a big deal. At one point in the show, Wiesenthal asked, “If we don’t need to worry about deficits, why do we have taxes?” Kelton’s response was illuminating.
Now, the traditional excuse for taxes is, paraphrasing Oliver Wendell Holmes, that they are the “price of civilization.” Skeptics point out that historically societies with very low taxes were often far more civilized—think the Dutch Golden Age, Islamic Golden Age, Victorian England, the pejoratively named “Gilded Age” in American history—that thirty-year golden age when almost everything useful was invented. And yet throughout that latter period federal receipts were one-fifth what they are today.
Why so much civilization? Because much of what governments do today was done by charities or businesses competing for customer dollars instead of seizing their budgets in taxes. When doctors, firefighters, and schools have to satisfy customers, things get quite civilized.
Still, even if we accept a “night-watchman state” argument for, say, national defense or salaries for Supreme Court justices, it gets tricky if government can simply print up the fresh money to pay for all that civilization.
Kelton’s answer? Taxes would still be needed, because they make us poor. And because they can punish people she doesn’t like.
Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.
Ah, but it’s not just about spending our money more wisely than we ever could. Kelton adds two secondary reasons she loves taxes: to punish particular people by redistributing their money, and to punish people for doing things she doesn’t like. Such as failing to buy energy-efficient appliances (no, really). In other words, social engineering with carrots for your friends, sticks for your not-so-friends.
I should add that libertarians completely agree with Kelton here—taxes are indeed for spreading poverty and for punishing people you don’t like. That’s why libertarians, being kind and generous, oppose taxes.
Meanwhile, it’s nice to know we all agree that taxes have nothing to do with civilization; they are for destroying with a side of discriminatory punishment.
