Full text: Government Debts and Inflation: Stumbling-Blocks in the Way of Keynesian Full Employment Policy

In fact, this difficulty (which also occurs - albeit 
immediately and not only in future - when you follow 
Kalecki's alternative policy of financing public spending 
by taxes on corporation profits, increasing thereby 
effective demand and employment) throws up a fundamental 
dilemma of Keynesian economic policy: For social (or 
egalitarian) reasons we want to tax business, for reasons 
of incentive to invest we want to relieve it from burden of 
taxation, sometimes even to subsidise it. Kalecki's modified 
income tax seemed to show a navigable way between Scylla 
and Carybdis; There is one level of income tax for capitalists 
who don't invest, and another, lower level for those who 
do invest their income. The difference between the two levels 
would seem to be relevant for the incentive to invest, while 
the absolute level (the higher one) would be relevant for the 
burden you want to put on the capitalists. In other words, 
if the incentive deemed necessary for investment demands 
a certain rebate on the higher level of tax you may within 
limits, raise the higher level to such an extent as to give 
you a desired yield on the total taxation of capitalist 
income. In other words you compensate for the loss in the 
rebate by taxing the "rentier" (the non-investor) the more 
heavily. The limits are of course that you can hardly tax 
more than 100% of income. Therefore, the level of the income 
before tax will be important; that, in fact, largely depends 
on the state of demand.

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