Simon S Shaw says:
July 23 2021 at 10:27 am
“Tax is the mechanism used to prevent inflation”
Who gets taxed if inflation starts to rise?
And when? Interest rates have been used previously and can be raised every month if necessary. Are you suggesting we should move to a system under which income tax rates could be raised or lowered on a monthly basis? I’d have thought this unwieldy and politically difficult. Do you have an answer to those potential problems?
Richard Murphy says:
July 23 2021 at 11:06 am
As the IMF now agrees, an interest rate rise will nikt deliver the desired change in the economy: multinational corporations are interest rate and price immune to change. So tax is all we have
VAT can be changed at will
But more importantly, we need a financial transaction tax charged on bank accounts for precisely this reason: that would fairly mute or stimulate the economy as required and could be progressive too
It could also include negative tax rates
Certain, some few, corporations are sufficiently well – internally – funded that external interest rates don;t make much difference to their investment decisions. Apparently.
This does fail as a concept because of course a change in interest rates changes the return they can make on their cash piles. If they can earn 30% – just to have a number – on their $300 billion of Scrooge McDuck then why would they build factories to gain a 10% return?
That is, they still face the same incentives and investment hurdles even though they’re not limited by requiring access to outside finance.
But OK, leave that aside.
Inflation isn’t driven by the actions of some few dozen megacorps anyway. They’re such a trivial fraction of the entire economy that they simply could not be the cause. Apple might be – at the wildest estimation – 1% of the US economy or 0.2% of the global (a company share of GDP will be its profits plus wage bill, not turnover). That’s not going to be the root of inflation.
But because of this we must tax each and every movement in and out of an individual’s bank account?