Book Review - Taxation: A Very Short Introduction

The book Taxation: AVery Short Introduction by Stephen Smith provides an introduction to mainstream analysis of taxes. It offers an excellent overview of the history of taxation, the forms of taxation, and current issues. The weakness of the analysis is that it is firmly conventional, and ignores the insights of functional finance (described in this primer). The book focusses on minimising the distortions created by taxation, while in fact those distortions are the necessary objective of taxation.

Fiscal Policy Links

Some comments on a couple of few good recent articles on fiscal policy.

Consequences Of A Basic Income Guarantee

The idea of a Basic Income Guarantee (hereafter known as BIG) has become increasingly a topic of interest. My views have been greatly influenced by Hyman Minsky and Modern Monetary Theory (MMT), where a guaranteed job was preferred to guaranteed income. (Minsky referred to this as an Employer of Last Resort programme; MMT refers to this as a Job Guarantee.) I explain why I view a BIG as being essentially unfeasible within Canada, using logic similar to their analyses.

My Initial Reaction To Optimal Fiscal Policy Theory

I am giving my first impressions of the literature on "Optimal Fiscal Policy", which is yet another sub-field of Dynamic Stochastic General Equilibrium (DSGE) models. Like any other area of academic enquiry, there is a huge wave of articles that are variations on a few themes. It appears that this field represents steps towards a more realistic model framework for DSGE models, but it is unclear whether they represent a practical advance over Functional Finance insights into fiscal policy.

The Debate Over The Purpose Of Taxation

Garth Brazelton's article "The Purpose of Taxation" discusses the purpose of taxation, and this has generated a fair number of comments on the Mike Norman MMT website. His article discusses government finance from the point of view of Functional Finance. In this article, I want to give a high level discussion of the controversy around the Functional Finance viewpoint on the role of government taxes.

Primer: What Is Functional Finance?

Functional Finance is a body thought that was originally proposed by the economist Abba P. Lerner. Functional Finance was associated with the “Keynesian” policies of the post-war era, but its influence eroded as “Keynesian” policies fell out of favour with the mainstream. The idea is that one looks at the function of fiscal policy (what it does), and you ignore the form (such as the amount of budget balances, or how deficits are “financed”).