Modern Monetary Theory: a study on the role of tax

• Grant number: 21/03468-0
• Support Opportunities: Scholarships in Brazil - Scientific Initiation
• Start date: June 01, 2021
• End date: December 31, 2021
• Field of knowledge: Applied Social Sciences - Economics - Fiscal and Monetary Policies
• Principal Investigator: Simone Silva de Deos
• Grantee: Enrico Campos de Mira
• Host Institution: Instituto de Economia (IE). Universidade Estadual de Campinas (UNICAMP). Campinas , SP, Brazil

Abstract

Tax is traditionally seen as the main public funding mechanism. Consequently, for this view, the expenditures made by the State are always constrained by tax revenue, which precedes the government spending (tax-spend cycle). This work will approach the role of taxes from the perspective of the Modern Monetary Theory (MMT), bringing an alternative view to the traditional one. MMT has a reverse logic, placing public spending as preceding taxation (spend-tax cycle). Thus, we can highlight that a major contribution of MMT is to reformulate the role of tax both in macroeconomics and in the perspective of social policy. We will explore the potential of taxation to be a mechanism for reducing liquidity, which is a possible policy instrument through which development can be fostered and social problems can be solved. As a result, the importance of studying the MMT is evidential, which allows the exploration of new approaches to taxes. (AU)