An idea for no/lower taxes

[Imagine]

Just before I start, let me begin by saying that I am almost certain there is a flaw somewhere in my argument, but I can't find it, so I'm posting the argument here in hopes that somebody else can.

------------------------------------------------------------


My idea: What would happen if the US government was to completely get rid of all the taxes, but were instead to increase the current money supply by just creating cash? Although there would be no physical taxes, there would be "effective" taxes as the inflation would lower your amount of money supply. The benefits this would bring would be the following:


1). Everybody who has USD is "taxed", i.e. external and foreign companies would be taxed, meaning less "taxes" for the residents.

2). One could no longer live like a king just because their great-great-great etc grandfather was a king, or the like.

Certain problems with this could be that the amount of inflation would completely devalue US currency, so this would not be sustainable.

Please help me out as I'm sure there's a reason we don't do this - but I can't think of it!

 

[Terrankiller]

So you are saying if the government just keeps printing money to spend and reduces/eliminates taxes, what would happen?

The US Currency would be worthless. Paper money would only be worth the piece of paper it was printed on. People would have to resort to bartering or switching to another foreign/global currency.

 

[Imagine]

Hmm, that's one of the problems I could see with it, but it doesn't necessarily have to be printing paper money. They could just be putting money in bank accounts, and nobody would be any wiser. And it wouldn't be worthless, it would just inflate much more than it does now, but it would be semi/sorta-compensated by the extra money you make by not paying taxes?

 

[Terrankiller]

Hmm, that's one of the problems I could see with it, but it doesn't necessarily have to be printing paper money. They could just be putting money in bank accounts, and nobody would be any wiser. And it wouldn't be worthless, it would just inflate much more than it does now, but it would be semi/sorta-compensated by the extra money you make by not paying taxes?

You are pretty much saying:

Give everyone free money, no one pays taxes.

The inflation would be relative to the amount of money that is circulated. Kind of pointless really to create currency. If you want people to have more money, just lower taxes.

Every time currency is created, the people actually get poorer unless compensated.

 

[Imagine]

I'm not saying to give everybody free money.

When the government receives taxes, they make everybody poorer, and I'm asking why it would be a bad idea to just make them poorer by lowering the value of the currency they currently have? This way, they not only make US citizens poorer but they also make multinational companies and offshore companies that don't pay taxes poorer too.

 

[Terrankiller]

Because everyone get poorer. /facepalm

 

[malakadang]

http://en.wikipedia.org/wiki/Inflation_tax

It would decrease peoples purchasing power and it affects the poor greatest as they have less disposable income than the rich. If you want to use the perfect competition model, the quantity of money is on the x axis, and the value of money the y axis. As you increase the supply of money, the value of it decreases. So yes, while poor people may now be millionaires, you've just hyper inflated the currency, and if people still use the currency, milk would cost in the 3-4 figure range.

 

[Tyro]

Your idea would make perfect sense if fiat money made any sense. Unfortunately, fiat money is intrinsically worthless. The value of fiat money is derived from the state's ability to terrorize peasants.
http://en.wikipedia.org/wiki/Fiat_money

 

[Imagine]

Because everyone get poorer. /facepalm

That's the point... Everybody gets poorer so the state gets richer, it also allows you to live "off the grid" if you want to...

http://en.wikipedia.org/wiki/Inflation_tax

It would decrease peoples purchasing power and it affects the poor greatest as they have less disposable income than the rich. If you want to use the perfect competition model, the quantity of money is on the x axis, and the value of money the y axis. As you increase the supply of money, the value of it decreases. So yes, while poor people may now be millionaires, you've just hyper inflated the currency, and if people still use the currency, milk would cost in the 3-4 figure range.

Alright, that makes more sense. I would have thought it would affect the rich more as they have could have millions in their bank accounts, but I just realized that this would not tax assets, so yeah.

Your idea would make perfect sense if fiat money made any sense. Unfortunately, fiat money is intrinsically worthless. The value of fiat money is derived from the state's ability to terrorize peasants.
http://en.wikipedia.org/wiki/Fiat_money

Alright, thanks for pointing this out to me