Tax Discount Bonds, a countercyclical crisis response

Posted by in Development, Economics

Tax Discount Bonds entitle their holders to reduce tax payments three years after their issuance. The bonds can be issued by governments to consumers or institutions, then sold on the financial market in exchange for legal money, and can therefore immediately increase spending power in the economy.

They are proposed in an article on the Social Europe site Social Europe site as an alternative to the EU’s current policy combination of money printing and austerity.
Tax Discount Bonds are also a counter-cyclical stimulus tool, a novelty today but one which should be part of mainstream economic management. Instead of promising “whatever it takes” to prop up badly run corporations and unregulated speculation, government could provide time-limited support but with a transparent commitment to later income reduction, while also taking advantage of multiplier effects in the economy.

Looking back in a decade it will be obvious that debt-fuelled whatever-it-takes was just another crisis deferral which makes the downside steeper when it arrives. We need to return to realistic government responses, so that corporations restructure when they fail. The future is probably no longer one of perpetual growth as the cost of resources rises; inefficient stimulus just reduces long term properity further.

The article also has this pointed critique of the current EU economic model:

“The European Monetary Union appears to be a system too rigid, like a cage, for 19 very different countries in terms of productivity, inflation, trade balance and technological progress. Moreover, under its statutes, the ECB cannot save a country plunged into a deep and lasting crisis. Indeed, EMU governance has three fundamental flaws: the rule of no restrictions on the free movement of capital; the rule of non-monetization of public deficits; the rule of no bail-out. They mean every country in the eurozone is potentially subject to speculative attacks on volatile financial markets, and, in the event of a major financial crisis, the ECB cannot intervene to save even the euro. The euro is thereby always prone to crisis and not irreversible as Draghi claims.”

Another 2016 article promoting Tax Discount Bonds can be found here on