Taxes remove money from the economy and also create the demand for the fiat currency.
A government that didn't spend any money while collecting taxes would create massive deflation and markets wouldn't clear. On the other hand, a government that didn't collect any taxes and simply spent the money would create inflation.
If for the increase in money supply there is a corresponding increase in GDP, there is no real inflation since the money is chasing more goods and services.
Guess what - that means more poor people getting what they need, before rich people get to fund golden toilets or something. And yes, I will think this way even when I am a billionaire.
A government that didn't spend any money while collecting taxes would create massive deflation and markets wouldn't clear. On the other hand, a government that didn't collect any taxes and simply spent the money would create inflation.
If for the increase in money supply there is a corresponding increase in GDP, there is no real inflation since the money is chasing more goods and services.
The increase in demand would happen mainly because the MPC multiplier of poor people is higher http://en.wikipedia.org/wiki/Marginal_propensity_to_consume
Guess what - that means more poor people getting what they need, before rich people get to fund golden toilets or something. And yes, I will think this way even when I am a billionaire.