In the chartalist view, taxes drive acceptance of state money. Through one channel, taxes induce labor services. The need to obtain state money to pay taxes ensures a willingness of some individuals to accept employment in the public sector in exchange for the state money. There is another channel that exists under a broader range of conditions. It is the power of government to induce supply of real output from private enterprise. Not only does government induce a private supply of real output to itself (a transfer of resources from the private to public sector), but it also induces a supply of real output to private consumers. Unlike the inducement of labor services, the inducement of private-sector output would apply equally to a pure labor economy or a purely mechanized economy, as well as to intermediate cases.
Consider the extreme scenario of a purely mechanized economy with private ownership of the means of production. With no labor performed, there would be no basis for monetary profit (see Implications of a Purely Mechanized Economy) and no profit-based reason to supply real output to non-owners. The lack of profit, however, would not mean despair for the owners. They would live in abundance, their robots and machines producing real output that could be consumed personally or exchanged (or shared) with other owners. Non-owners, in contrast, would be excluded from a share in the output, except to the extent private charity occurred.
Government, by effectively enforcing an exogenous tax obligation on owners, would be in a position to ensure that some output was obtained by non-owners. One method would be to provide everyone with a basic income equal, in aggregate, to the exogenous tax obligation imposed on owners. Another method would be for government to purchase the desired output for an amount just sufficient for owners to meet the exogenous tax obligation and then distribute the publicly purchased output freely to non-owners. Either way, owners would be induced to supply output to non-owners, whether directly or indirectly, even though at zero profit.
But, as already noted, the capacity of taxes to induce real output does not apply solely to the extreme case of a purely mechanized economy.
Suppose a basic income were introduced under today’s conditions. This would reduce the compulsion on individuals to supply labor services. But, at the same time, the incentive for private enterprise to supply output on the market would remain. Actually, if anything, the incentives applying to the owners of private enterprise would be strengthened, because any increase in government net expenditure or equalization of income distribution would bring stronger private demand for real output. Private enterprise would have an interest in extracting as much as they could of the basic income, which although initially going to consumers would end up ultimately as revenue for one business or another except when saved by the recipient.
To the extent production methods remained reliant on human labor, the inducement to supply real output would at the same time act as an incentive for private enterprise either to attract workers into employment or mechanize, whichever was the most profitable way to capture a share of the basic income (and other income) devoted to consumption. Individuals who desired income in excess of the basic income would be open to persuasion whenever the job offer was good enough. Such individuals might or might not succeed in out-competing machines for a time.
To be clear, the intention here is not to offer yet another argument on the merits or otherwise of a basic income. The point, as indicated earlier, is rather that taxes would remain a powerful inducer of real output even in the extreme eventuality of a purely mechanized economy in which no labor services whatsoever were involved in the production process.
Needless to say, the legitimacy of private ownership of the means of production would be as questionable as ever in the extreme case of a purely mechanized economy. A form of money, though, might still be retained for the purpose of individuals indicating the composition of their demand for an array of consumption items, but non-monetary mechanisms could just as easily achieve the same effect.
