Re: Mosler Seminar

[Warren Mosler <mosler@xxxxxxxx>]

James R. Olson, jr. wrote:
>
> At 08:25 AM 3/4/97 -0500, Warren wrote:
>
> >The dollars, marks, yen, etc. are govt issued tax credits.  If the govt
> allows
> >others to issue such tax credits, it is the same as simply giving them the
> >money.
>
> I understand that.  I was considering state or county tax credits, rather
> than federal credits.  Federal credits would be the same as the federal
> government issuing the money.  Local tax credits would be independant of
> federal money, except insofar as there is a conversion process.
>
> The particular problem of my state is that we depend on federal money to
> keep our balance of payments even. (I'm sure this is true of most of the
> poor states.)  We have recently lost most of our agricultural export
> industry (sugar and pineapple) and the budget cutting craze has cut into
> our federal funds.  It seems very important to me to keep as much money in
> the state as possible, in order to prevent an a local recession.  The state
> government is in a budget crunch, due to the sudden drop in revenues and
> the constitutional requirement of a balanced budget.  State layoffs due to
> the crunch have added to the problem.  The Feds don't seem inclined to
> help, especially since we are historically a Democrat state, and rejected
> the Republican carpetbagger in this olast election, despite massive RNC
> financing.
>
> On reading Soft Currency Economics crossed with the LETS thread, it occured
> to me that the state could act unilaterally by issuing negotiable tax
> credits, and control their value by judiciously controlling their number.
> In this way, it could finance projects that it didn't have the fedaral
> notes for, and also keep a certain portion of its spending inside the
> state, since the tax credits wouldn't be negotiable outside it.

This gets to my 'Community Service Notes.'  Let the state impose a
property tax payable in CSN (community service notes), and then
pay, say, 10 CSN per hour for community service work, which can include
anything the state would like to get done.  This could also be done
at the local level.  There would be no purpose in restraining spending,
for as long as the rate of 10 CSN per hour was maintained, the value would
be there.  The issuer of CSN would of course expect to run a 'deficit'
as it is likely the population would choose to earn more CSN than needed
for immediate tax payment.  Also, the overnight interest rate would be
0 bid, due to the 'float' of CSN resulting from such deficit spending,
which should be no problem.  The CSN would not be convertible by the state,
but there would likely be a private 'foreign exchange' market vs dollars
as property owners who did not want to do 'community service' would be
attempting to purchase CSN needed to pay their taxes.  There would also
technically be no local unemployment, as anyone could do as much community
service as they pleased.  Of course, the real wage could fall very low,
or rise very high, with local market conditions.  I think this would
be self adjusting, but that is another analysis.

Would the Feds allow this?  Don't know.
I think they may try to tax the CSN income,
which would not kill the program.


Warren

>
> The issued tax credits would essentially be future taxes being spent now.
> Requiring that a certain portion of taxes be paid in credits, and then
> restricting the number issued would keep their market value high.
>
> The hangup is in whether the federal government would consider the tax
> credits to be currency, as they are tending to do with LETS.

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