THE ROLE OF CURRENCY AND FUNCTION OF TAXES IN MODERN MONETARY THEORY
DOI:
https://doi.org/10.12957/rfd.2024.85716Keywords:
Currency. Modern Monetary Theory. Function of taxes. Valuation of national currency. Opening up space for public spending. Fighting social inequality through tax progressivity. Extrafiscality. Fiscal responsibility. Fundamental rights.Abstract
Modern Monetary Theory advocates that the State that issues its own currency does not need taxes to finance public spending. As a result, the entire traditional basis for taxes falls apart, since they no longer appear to be necessary to cover public expenses. However, taxes still have four fundamental functions: (i) the valuation of the national currency necessary to pay taxes; (ii) opening up space for public spending by reducing excess liquidity in the market; (iii) promoting income redistribution with the adoption of a progressive tax system; and (iv) inducing certain behaviors and abstentions, through extrafiscality. Overcoming the dogmas of selective austerity is a paved path towards adopting the idea of fiscal responsibility that is harmonized with fundamental rights, with the use of taxes and public spending in the implementation of public policies.
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