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Modern Monetary Theory and the Changing Role of Tax in Society

Baker, A. & Murphy, R. ORCID: 0000-0003-4103-9369 (2020). Modern Monetary Theory and the Changing Role of Tax in Society. Social Policy and Society, 19(3), pp. 454-469. doi: 10.1017/S1474746420000056


Tax is traditionally viewed as the main funding mechanism for government spending. Consequently, social policy is often seen as something determined and constrained by tax revenue. Modern Monetary Theory (‘MMT’) presents a reversal of the tax-spend cycle, by identifying a spend-tax cycle. Using the UK as an example, we highlight that one of MMT’s most important, but under-explored, contributions is its potential to re-frame the role of tax from both a macroeconomic and social policy perspective. We use insights on the money removal, or cancellation function of taxes, derived from MMT, to demonstrate how this also creates possibilities for using tax to achieve social objectives such as mitigating income and wealth inequality, increasing access to housing, or funding a Green New Deal. For social policy researchers the challenge arising is to use these insights to re-engineer tax systems and redesign social tax expenditures (STEs) for creative social policy purposes.

Publication Type: Article
Additional Information: © The Author(s) 2020. This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (, which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords: Tax, modern monetary theory, social policy, modern tax theory, money, debt, government
Subjects: H Social Sciences > HJ Public Finance
H Social Sciences > HM Sociology
Departments: School of Policy & Global Affairs > International Politics
Text - Published Version
Available under License Creative Commons: Attribution International Public License 4.0.

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