In the modern monetary context, on the operational level, there is a huge difference between federal income taxes that are paid and state income taxes that are paid…Since leaving the gold standard, the federal gov’t, the issuer of dollars (dollars that are no longer convertible or fixed to anything), doesn’t “need” those dollars to finance their spending; but the state gov’t, the users of dollars, do need those dollars to finance their spending. State and local gov’t are in the same boat as the rest of us, they can’t issue dollars, they have to live within their means, have a balanced budget, avoid debt, etc.


This is not the case for the federal gov’t anymore…The federal gov’t is the issuer of dollars, they are in a different paradigm from the rest of us, the users of dollars. In the post-gold-standard, modern monetary system, the federal gov’t needs to be more concerned with balancing the economy, not balancing a “budget” because a better balanced national economy produces a better balanced national “budget”, not the other way around. The federal gov’t now only needs to increase federal taxes to slow the economy, what a proper ‘fiscal policy’ would call for to arrest any inflation threat. However, our economy is not very strong these days, there has been more of a deflation threat these past 6+ years after the credit crisis, and why it’s a good thing that 99% of US citizens today are paying way less federal income taxes, at a rate not seen since the 1950s (1% of Americans, about 3 million people earning over $615,000 last year, paid 46% of total 2014 federal income taxes yesterday).


eddie d