Options in the tax wipeout aftermath

From Dean Baker, an economist with the Center for Economic Policy Research, a strategy for offsetting the loss of state tax deductibility that will occur when the tax bill is implemented: replacing state income tax revenue with revenues from a state employer-side payroll tax. Provisions of the bill do pose fiscal problems for a state without its own currency, of course. Numerous priorities will be at stake as states and localities’ work is fundamental–including most government health care and education spending. (Dean’s article is at Truthout; his organization provides the link.)

A U.S. state cannot have a currency that is legal tender (the dollar is a legal monopoly) but currencies can and do arise when what is lacking is money. A currency that exists alongside a national currency but lacks the same status is often called a complementary currency. It can facilitate a barter economy that is local and locally focused. For such a currency to have value, as advocates of modern money theory point out, one must have some way of imposing an obligation to pay in terms of the currency; some universities for example have currencies, and require students to pay an obligation in the currency that they can earn through work for nonprofit organizations. If the central government fisc becomes too inconveniently restricted, such alternatives may be tried in many places where they have not been before now. The University of Missouri Kansas City’s Mat Forstater argued effectively for the practicality of the idea at the Association for Social Economics (ASE) sessions at the recent conference in Philadelphia.