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23-24 High School Topic: Pigouvian Taxes & MMT

Author: Kevin McCaffrey, Assistant Debate Coach

As many high school policy debaters begin to explore the 2023-2024 Economic Inequality topic, the MSU debate team has just completed a season during which we researched some related ideas. I’m hoping sharing some of my experiences and thoughts might help students learn and prepare, and am writing a couple short posts in which I unpack a few ways some arguments and concepts I’ve encountered might pop up in next year’s high school topic.

This first post focuses on “fiscal redistribution,” the direct object of the resolution’s wording. Most of the definitions I’ve encountered, through my own very superficial research and in the starter files I’ve seen published by various summer camps, invoke the phrase “tax and transfer” in explaining their definition, which raises two thoughts, both informed by MSU’s experience writing and coaching an Aff last season that advocated a tax on AI earmarked to fund basic services.

The first is that this raises the question of “tax good” advantages, with a virtually limitless choice of behaviors to disincentivize. Although I was not personally involved in the 2017-2018 college topic, which required the Aff to fund health insurance, but left the question of revenue generation up for debate, it seemed as though a strategic dynamic emerged where the Aff would preemptively specify a particular means of generating revenue in order to be ready to defend the origin of their funding, with the ability to continually break new and somewhat unpredictable revenue streams, as a way to complicate Neg strategy. While this year’s high school topic seems to give the Neg the ability to prepare “taxes bad” generics as a strategic counterbalance, in comparison to the potentially overwhelming variety of taxes available for the Aff to defend, each of which could function as complete, defensible policy changes on their own, I’m not sure that the set of relatively predictable “taxes bad” generics will be effective as an attempt to equalize argumentative ground, and I suspect Neg teams may start looking for a generic that can capture “tax good” advantages in addition to advantages focused on the Aff’s chosen transfer payment.

The second thought is that “tax and transfer” seems to potentially imply the question of “earmarking,” or the practice of legally dedicating revenue from particular taxes to particular transfer programs. I have no idea where the balance of opinions within the debate community will fall on this question, but some of the definitions I’ve seen do seem to speak explicitly to it. For example, an article titled “State-Building without Taxation. The Political Economy of Government Finance in the Eighteenth-Century Republic of Bern” by Stefan Altorfer-Ong states that “fiscal redistribution is normally understood as the amount of money that is taxed from the rich and used for social transfer payments,” and the “Commitment to Equity Handbook: Estimating the Impact of Fiscal Policy on Inequality and Poverty” published by the Brookings Institution similarly states “‘fiscal redistribution’ refers to the process by which the state collects revenues from individuals and households (primarily through taxes) and spends these revenues on benefits,” and the particular language choices in these definitions seem, fairly explicitly, to indicate earmarking as a feature of “tax and transfer” schemes. It’s perhaps also worth mentioning that the only topic area that already exists (Social Security) is an earmarked tax.

So far, this may seem innocuous, but I think it quickly starts to get complicated when the concepts of Modern Monetary Theory and “Pigouvian” taxes are added to the mix. Many of the “taxes good” advantages I’ve seen discuss “Pigouvian” taxation in their defenses of what they think should be taxed, and while I am no expert, the “Pigouvian” conception of taxes, as used to disincentivize socially harmful behavior for policy reasons, seems to depend fundamentally upon the ability to “right-size” or optimize the disincentive created by the tax to achieve the policy benefits desired – rates should equal the marginal cost of negative externalities. In other words, if the quantity of tax revenue generated from a particular tax needs to match the quantity of funding necessary to finance a particular transfer, then tension is necessarily created between the policy goals of the tax and the transfer, unless the optimal quantities of both coincide, which seems unlikely, given both seem likely to change over time.

It turns out there are academics who connect these dots explicitly, at least within the umbrella of MMT, although I’d guess that there exist Pigouvian tax theorists making similar arguments without endorsing MMT. MMT is often explained as some version of “governments are not people, they don’t have to balance their checkbooks because fiat currency is a fiction and they can print as much as they need” – and is often employed in arguing against “austerity politics” and “budget hawks” making arguments about “deficits” where net tax revenues are less than net expenditures. It’s easy to imagine MMT literature deployed as a “monetary” “Taxes PIC”, with an internal net benefit about monetary policy innovation (perhaps some variation on “printing money good”) that positions against taxes, or in combination with a separate “taxes bad”-themed net benefit. There appear to be some MMT proponents who make these arguments (https://www.dissentmagazine.org/article/the-tax-trap). But it seems like there are more MMT proponents that disagree with such “taxes bad” arguments, and instead argue for progressive taxes as the solution to inflation, which is the most common criticism of printing money. These authors more narrowly criticize the linkage between taxes and spending, and think both can be good when delinked. In both cases, when MMT advocates contrast “printing money” to tax financing, they are not referencing the presence of a distinct, positive funding mechanism; as I understand it, most money is never actually printed and exists only as an electronic payment, which could look the same in both cases. Rather, they are referencing the deliberate absence of an effort to link those expenditures to general or earmarked revenues as financing. This becomes strategically relevant if financing becomes a definitional component of “fiscal redistribution,” as it seems to be, because even if the plan hasn’t chosen to specify an earmarked revenue stream, perhaps Topicality definitions could still be leveraged to force an Aff to defend linkage to general revenues, and that linkage may provide the basis for competition for a Pigouvian-grounded net benefit.

In this context, I suspect the more threatening application of MMT to the Aff, and more useful application of MMT to the Neg, won’t be found in a “Taxes PIC” but instead in a “Tax Financing PIC” (or “Earmarking PIC”) that includes the plan’s transfer program (jobs/social security/basic income), and can include any revenue mechanism (like a carbon tax) advocated too, but still exclude “fiscal redistribution” as the financing linking the two (as an earmark or otherwise). To illustrate this idea, I’ve attached a document that pretends the Aff has read a BI plan that specifies funding via a carbon tax, with an example 1NC Counterplan with an internal net benefit and possible 2AC responses. I stress that this is not intended to be a “real” argument as-is – the evidence I’m using comes from either MSU blocks from our recent season (so, the deficit card assumes the Aff is anti-capitalist and already reading advantages about austerity politics and social service accessibility, for example) or some very superficial google searches, but what I’ve read leads me to believe that better evidence will exist for all relevant pieces – especially the Neg advocate, which is only really about UBI (although I creatively highlighted mentions of a job guarantee and Social Security) and likely fatally weak on “yes spillover” and “yes extinction”, but does explicitly position against “pooling the tax money together and distributing” and instead advocates to “eliminate…taxes as part of that approach” (while endorsing de-linked taxes) so I do think it’s reasonably close on intent to advocate the CP (as a PIC out of “fiscal redistribution” precisely), and suffices as a proof-of-concept. I also exclude the “perm: do counterplan” debate, as camp files will certainly provide the evidence necessary to debate that question on both sides.

To be clear, I’m not advocating such a counterplan, nor such a division of ground, nor trying to posture like “Taxes PIC with Taxes Good NB?!” is some kind of galaxy-brain argument jiu-jitsu. I just think economics can get really confusing, and I’m hoping that using this example can help illustrate some of the nuances surrounding theorizations of MMT and Pigouvian taxation in ways that help to clarify strategic thinking. Perhaps MMT is the only literature base that focuses offense on financing while coopting Aff advantages to taxing, and the Aff won’t need anything more than MMT indicts to beat this type of counterplan. Perhaps there really aren’t that many taxes that people think are worth defending, and the Neg won’t really need a strategy that can accommodate unpredictable “taxes good” advantages. Perhaps the balance of debate opinions will result in a consensus division of ground that acknowledges this particular meaning of “tax and transfer” as earmarking, but decides precision is less important than this counterplan is annoying. Perhaps I’m simply wrong about this meaning of “tax and transfer” and reading too much into the coincidental wording of definitions. Regardless, I’m hoping that merely raising the question is additive.

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