I understand this part of MMT: From 100 USD that the Fed prints, the state can get back (or destroy) 10 - 90 USD back in taxes. But what is the effect of taxes on the economy:

  • A household buys food for 50 USD incl. 10% tax - what is the effect of the tax here?
  • A private person buys a luxury item of 80 USD with 25% tax - what is the effect of the tax then?
  • A foreigner buys the same luxury item of 80 USD but requests tax free discount (as he has an account on the Bahamas ) - how does tax discount and avoidance show up in MMT ?
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    $\begingroup$ I'm not sure if there is a direct answer but this looks like it may be helpful: neweconomicperspectives.org/2014/05/taxes-mmt-approach.html $\endgroup$ – Brian Z Jun 29 '20 at 17:54
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    $\begingroup$ As a proponent of MMT, I cannot see what the relationship is between the question and MMT. The MMT argument is that taxes create demand for a currency, and help determine the price level. But this shows up in aggregate, and what happens in particular transactions tells us nearly nothing. $\endgroup$ – Brian Romanchuk Jun 29 '20 at 19:29

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