The good bad news about the Inflation Reduction Act

Now that Senator Sinema has signed on, the Inflation Reduction Act will pass by the scant majority of 51 to 50, including the Vice President’s vote.

Sinema had opposed closing the so-called carried interest tax loophole. Carried interest is treated as a long-term capital gain. Because it’s taxed at a lower rate than ordinary income, private equity, venture capital, and hedge fund operators benefit.

Presumably, she is in bed with those people.

Giving these over-paid number pushers an extra benefit is an anathema to anyone who wants the Gap between the rich and the rest narrowed. So, on that basis, the loophole should be closed.

But it is a federal tax, and federal tax dollars do not fund anything — they are destroyed upon receipt. So whatever reduces federal taxes (i.e., leaves more money in the private sector) benefits the economy.

The dollars you use to pay federal taxes are part of the M2 money supply measure. When those dollars reach the U.S. Treasury, they cease to be part of any money supply measure. Those dollars are destroyed.

When the government spends, it creates new dollars, ad hoc.

Because the Monetarily Sovereign Treasury has the infinite ability to create dollars, there is no answer to the question, “How much money does the Treasury have?” Thus, no measure includes Treasury dollars.

So, there is good and bad in that loophole, but on balance, including the loophole is good because it benefits the entire private sector.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

1. Monetary Sovereignty describes money creation and destruction.
2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

1. Eliminate FICA
2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
3. Social Security for all
4. Free education (including post-grad) for everyone
5. Salary for attending school
6. Eliminate federal taxes on business
7. Increase the standard income tax deduction, annually. 
8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
9. Federal ownership of all banks
10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY