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It seems obvious once you think about it that at the federal level taxes don't pay for spending. The fed can print as much money as it wants. Taxes only serve to remove excess cash from the economy and keep inflation down.



Or, even more abstractly, they serve as an alternative to inflation, which devalues money indiscriminately. Printing money and taxation both transfer value to the fed; but the latter can be crafted & targeted while the former cannot. In practice perhaps the most significant realization of this is that inflation is a tax on wealth while our system today is mostly a tax on income.


Your last point is a great one and reflects the economic literature on the subject in that inflation is effectively a tax on money holdings.


Look at Argentina: there is a very high inflation, and also there are very high taxes.

I mean that what you mention does not look obvious to me, as you can reach a point where even very high taxes cannot counter inflation.


I generally agree, but take Argentina with a grain of salt. It is an exceptional economic case on any and all measures.


Eh, is that obvious? In some sense I don't pay for a burger with money from my job. I use my credit card to pay for burgers. So it's like I just print the money I need. Of course none of that is true. The fed could in theory print all the money it wants just like I could I theory borrow all the money I want. Both of us realize that there's a limit to how far that can take us.


Its one way of doing it, but think that tax policy you can control: you can make it progressive, or give credits, or do something else. Printing money affects all the currency, and has uneven effects of all kinds, including favoring the banking sector the most.




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