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> and that the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of
by bitshiftfaced 5y ago
> and that the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector.
I don't understand this. Increasing taxes reduces the spending power of the individuals who pay the taxes. But that taxed money doesn't evaporate. The government spends it or redistributes it. It ultimately makes its way back into the private sector.
- brimble 5y agoThe key concept is that taxation is unrelated to the government's ability to spend (with fiat currency). They can tax $1T and spend $1T. Or they can tax $0 and spend $1T. Government is not constrained from spending whatever amount it likes—except in the spending's effects on money supply, inflation, et c. From that POV, destroying money (or, if you prefer, reducing the rate of increase in the money supply) is exactly what taxation does.