No Tax

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no [Mind explaining why?]

What if there were no taxes and the state just printed money as necessary? The cost of government would then be borne in direct proportion to an individual's assets, since the additional printed money would devalue all previously existing money equally. Taxes were necessary so long as money was linked to actual commodities such as gold, but that hasn't been the case for several generations now.

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Comments welcome. This was a crazy(?) thought I had today while discussing the meaning of deficit spending. -- AndyPierce

The problem with using inflation as a tax on capital is that only the rich are conscious of it. Most people act as if inflation did not exist (contradicting the right-wing assumption of Homo Economicus). What that means is that rich people will find ways around the capital tax and they will exploit the poor's ignorance and apathy of that tax to the latter's detriment. IOW, inflation is regressive. Much better schemes to impose capital taxes have been enacted. One is Negative Interest Currency. See http://www.transaction.net/money/cc/cc01.html How will the rich find a way around it? Aren't the rich already getting out of paying taxes under the current system?

Inflation is negative interest currency. This is obvious in countries with hyperinflation; currency is spent immediately on durable goods because the currency is worth less tomorrow.

Inflation and hyperinflation are very different phenomena. Hyperinflation is negative interest currency but for the reasons stated above, inflation is not.

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The government does print money as it thinks it needs it. hence inflation. The problems with inflation begin with the first minted gold coins (don't remember the date) and the Roman empire fell as a result of indiscriminate inflationary practices (not entirely, but it was a big reason). see http://polyconomics.com/showarticle.asp?articleid=147 and the following article. In fact, feel free to browse the entire site. Very good stuff on Supply Side economics (This might be worth taking seriously if there were a single economist alive on the entire planet who thinks SupplySideEconomics? isn't a bunch of crap. Members of the Frasier Institute aren't economists.):

  As early as the rule of Nero (54-68 A.D.) there is evidence that
  the demand for revenue led to debasement of the coinage.... Nero
  reduced the silver content of the denarius to 90 percent and
  slightly reduced the size of the aureus in order to maintain the
  25 to 1 ratio. Trajan (98-117 A.D.) reduced the silver content to
  85 percent, but was able to maintain the ratio because of a large
  influx of gold. In fact, some historians suggest that he deliberately
  devalued the denarius precisely in order to maintain the historic
  ratio. Debasement continued under the reign of Marcus Aurelius
  (161-180 A.D.), who reduced the silver content of the denarius to
  75 percent, further reduced by Septimius Severus to 50 percent. By
  the middle of the third century A.D., the denarius had a silver
  content of just 5 percent.

you see, once a government starts on the path to "printing more money" or "debasing coinage", it never stops. The US dollar was the only currency on the gold standard up til about 1971 and this kept inflation in check. The then current administration (under Nixon, I believe) severed the link between the USD and gold, and we were able to print money at will... the terrible double digit inflation of the 70's decade was the result. The fed chair was passed to volckner (sp) and he sharply reduced the available credit (by raising interest rates) and everything was painful for about three years, but since then the fed has maintained a slight inflationary bias of about 3%/year; I think under the assumption that a slight inflation is easier to control than hyper-inflation or slight or rapid deflation. probably right, but way beyond me.

Back on-topic; you have to consider what money is. As in 'all the money in the world'. It is a measure of the total amount of goods and services available in the world. If there is a larger increase in money than goods and services, you have more money chasing fewer goods and the value of the dollar goes down, and prices rise: inflation. Consider that all the services and supplies that the tax-less government would use would have to be paid somehow, and that just printng more money to pay for the congressmen and $600 toilets that they order, and then all that money gets dumped into the market (traded for goods), you have runaway inflation. Have you ever known a government to keep its spending in check about anything? Even right now, the government prints more money to make up for a short term shortage in taxes at the cost of future buying power (not a very smart trade, but it still happens), and soon we would be sitting on a pile of 13 million dollars that couldn't buy a cup of coffee...

I feel that I haven't adaquately answered the question... maybe if I knew what the discussion was? But I hope this helps. [BelTorak]

The arguments above oversimplify the situation to the point where it bears no resemblance with reality. In particular, the right-winger's "inflation warrior" mentality leaves no room to acknowledge that in the face of rising productivity, you need to print more dollars just to keep the value of currency constant. And if you don't print more dollars then you cause a shortage of currency, which causes the economy to stall, which triggers a massive depression. It's only in a supply sider's idealized world that money can have its value adjusted smoothly and incrementally upwards. In reality, the only kind of upwards correction of money possible is the depression. And most people don't want depressions. (Rich people naturally don't care, which is why they like supply side quackery. Supply side "economics" is to real economics what creation "science" is to biology.)

Additionally, inflation is rarely a measure of the value of dollars with respect to generic economic goods (which grow with time). It's more usually a comparison of dollars to some specific fixed good, like land. When the rich see the value of their land decrease in proportion to the rest of the economy, they call this inflation and order their colleagues in government to stop it even if the production of dollars has only been keeping pace with economic growth. How do they do this? By stalling the economy. But these phenomena belong to the realm of real economics, along with other things such as poverty and starvation. And reality has no place in the supply sider's mind which is devoted to meaningless abstractions and dogma.

Another example of the warping of reality perpetrated by supply-siders is the article referenced above. The notion that ancient Egyptians did anything resembling modern banking (enough to merit the term 'banking') is absurd. It's a perfect example of capitalist dogma obscuring reality.