I know most of the people here did not take this seriously, but in an ideal world this is how taxes would work (I am no economist so take this with a grain of salt, this is what I think should happen).
"Government needs money to run. They have to develop infrastructures and pay salary of public servants. Also they have to provide welfare to under privileged and subsidies to student communities and such. They cannot just print infinite number of notes so they have to take money from the current cash flow. The cash flow here means things like purchases, salaries, revenue, real estate etc. Now, to do that they have to decide how much to take from whom. They cannot take a fix amount as not every mode of cashflow would be viable with that fix amount. So they decide how much to pull from where. Thus on income we have income tax. But that too is not fixed. You pay depending upon the size of your income and nothing else. Thus ideally, the rich pay more and poor pay less. On the other hand, you have things like sales tax, where the government takes a fixed percentage of all the sales made by a company.
In short the government takes some amount of your money each time you make a transaction... well most of the times. But rest assured, your money comes back to you. The government gives it back in terms of infrastructure or services or carnivals or social security or things like that."
I know this is not perfect, nor is it what happens in the real world. But this is what should happen I think.
Actually, they could. Printing say 1 note for every 9 notes in existence would lead to an inflation of around 11% and is equivalent to a uniform property tax of 10%.
The reasons we don't do things that way I can think of are:
- it would make inflation huge (government spending typically is over 30% of GDP; that would give over 50% inflation)
- it was not possible under the gold standard.
- people would feel it as unjust that one's cash and bank accounts are 'taxed', but e.g. houses one owns are not.
- because of the former, it would tax the poor way more than the rich.
It would be a really good way to stimulate consumer spending, though.
Also, people would eventually stop using the government's currency, the bank notes it printed would then be worthless, and the government would have to start explicitly taxing again. Only now it would have an economy denominated in a foreign currency.
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I know most of the people here did not take this seriously, but in an ideal world this is how taxes would work (I am no economist so take this with a grain of salt, this is what I think should happen).
"Government needs money to run. They have to develop infrastructures and pay salary of public servants. Also they have to provide welfare to under privileged and subsidies to student communities and such. They cannot just print infinite number of notes so they have to take money from the current cash flow. The cash flow here means things like purchases, salaries, revenue, real estate etc. Now, to do that they have to decide how much to take from whom. They cannot take a fix amount as not every mode of cashflow would be viable with that fix amount. So they decide how much to pull from where. Thus on income we have income tax. But that too is not fixed. You pay depending upon the size of your income and nothing else. Thus ideally, the rich pay more and poor pay less. On the other hand, you have things like sales tax, where the government takes a fixed percentage of all the sales made by a company.
In short the government takes some amount of your money each time you make a transaction... well most of the times. But rest assured, your money comes back to you. The government gives it back in terms of infrastructure or services or carnivals or social security or things like that."
I know this is not perfect, nor is it what happens in the real world. But this is what should happen I think.
They cannot just print infinite number of notes
Actually, they could. Printing say 1 note for every 9 notes in existence would lead to an inflation of around 11% and is equivalent to a uniform property tax of 10%.
The reasons we don't do things that way I can think of are:
- it would make inflation huge (government spending typically is over 30% of GDP; that would give over 50% inflation)
- it was not possible under the gold standard.
- people would feel it as unjust that one's cash and bank accounts are 'taxed', but e.g. houses one owns are not.
- because of the former, it would tax the poor way more than the rich.
It would be a really good way to stimulate consumer spending, though.
Also, people would eventually stop using the government's currency, the bank notes it printed would then be worthless, and the government would have to start explicitly taxing again. Only now it would have an economy denominated in a foreign currency.
In short, They cannot just print infinite number of notes