Until a few days ago, I was still of the belief that taxes were going to dramatically rise by next year. It was based on solid historical precedent. At those times when governments finally (and inevitably) arrive at the point where they have ruined the economy and it begins its collapse, so government revenue falls. As revenue falls, so governments increase the level of taxation even more to try to compensate.
For twenty years it has been obvious that that the tower of debt would topple over at some point in the not too distant future. I have relied on historical precedent to inform my opinion of the final stages so that I could plan for the event. Ruinous levels of taxation was an easy assumption but, I now believe, a wrong one.
I was aware of Modern Monetary Theory (MMT), but could not take such an idea seriously. Even a gullible electorate would not believe that money that held any sort of value could be given away willy-nilly on a weekly basis.
Under normal circumstances, I would still hold that belief, but these are not normal circumstances. Governments in the West are already committed to ‘Largesse For All’ in their efforts to counteract their panicked response to the Wuhan Virus.
What will they do when the Largesse reaches its expiry date and the reality of the myriad businesses that are closed forever hits home? When they discover that unemployment is in double digits and rising?
The agreement that tenants cannot be evicted terminates at the same time as the Largesse. The picture that brings to mind is of numerous families, voters, evicted and out on the streets. The media will love those pictures.
The government will see no alternative but to continue payments. MMT will be marched in through the front door in the guise of Universal Basic Income (UBI). People will be used to free ‘money’ by then. It will seem almost normal – what they are used to.
MMT will begin with the UBI and expand from there. If it can be used for that, then why not that… and that?
As David Evans at Wentworth Report said: “taxes are so old hat”.