Taxes: The Barbarous Relic of the 21st Century

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Source: Mises Institute.

The writer suggests that — as a technical matter — it is feasible to eliminate taxation by simply replacing tax revenues with an equivalent quantity of printed money. This is feasible, he claims in part, because tax collections have the same inflationary effect as printing money.

To see why, consider the simple equation M = G, where M is the total quantity of money and G is the total quantity of goods. Inflation occurs when M increases in relation to G, but this can occur in two different ways. Either M can grow or G can shrink.

Printing new money causes M to grow. Taxation causes G to shrink. The inflationary effect is the same either way. Thus, it is feasible to replace taxation with money printing.

There is more to the story, but I think it might be useful to the operation of a democratic society for there to be a clear, experiential link between prices and government spending levels.

Published by John Todd Roberts

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55 thoughts on “Taxes: The Barbarous Relic of the 21st Century”

    1. I’m thinking about after SHTF. The people who rebuild society should be aware of basic economic concepts, such as M=G.

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  2. While I can follow the logic, there are definitely some legitimate reasons for some taxation such as national defense. I do not think taxation was ever meant to be a conduit to steal from one to pass out to another. It has become so bastardized that Democrats overtly use it to buy votes and Democrat voters use it to give themselves free money for sitting on their ars. Social spending may seem noble to some but it is nothing more than legal theft.

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    1. Yeah. Republicans just earn votes by giving tax breaks to corporations who utilize the infrastructure paid for by the rest of us through taxes.

      You are too one-sided in your views to see the BIG PICTURE.

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        1. That’s a basic truth that few people get.

          A publicly owned company has to pay dividends commensurate with its risk level, or people won’t buy the stock. That company has to compete in the labor market for workers, So, both investor profits and wage are really pretty inflexible. The only places those taxes can come from are the consumers and increases in efficiency, usually by cutting jobs or offshoring to keep prices down enough to be competitive.

          Taxing corporations comes down to either higher prices if foreign competition is not available or loss of jobs if it is.

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          1. And I guess that is why Warren Buffet’s secretary pays a higher tax rate than Mr. Buffet.

            And then corporations still take advantage of the taxes the peons pay for infrastructure and other public uses. They should be contributing to what makes it possible to do business.

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          2. First, of course Buffet’s Secretary pays a higher rate. Her taxes are on earned income on her $200K+ salary. his income is made up of qualified dividends and long term capital gains which are taxed at lower rates(and, in the case of the gains, really should not be taxed at all.)

            https://wealthydiligence.com/warren-buffett-pays-less-in-taxes-than-secretary/?msclkid=4ab8d845d09511ec886decf49cdca347

            But what do you think would be gained by making corporations ‘contribute’ to infrastructure since they pass their taxes on to us anyway?

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          3. What about the privately owned companies? They get the same kind of advantages that the publicly owned ones do and they still hold down worker pay and ensure that the stockholders and C-suite denizens get all of the benefits.

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          4. They compete with publicly owned companies for sales and wages. There is really no difference as if publicly owned businesses got better treatment, they would sell their private businesses and buy shares in publicly traded ones.

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          5. While I agree that we should simplify and rationalize the tax system by taxing only actual human beings, I do not agree with your analysis about whose pocket corporate income taxes are coming from. Income tax is NOT a cost of doing business as you seem to think. Lower taxes on corporate income do not bring benefits to employees, customers, or suppliers. Their “prices” are market driven and the market does not care what rate of tax is going to be applied on income. The only actual beneficiaries of lower corporate taxes are investors. Their “price” is the only one that comes out of after-tax income.

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          6. Dividends are paid after taxes.

            Of course they are just another cost of doing business from the standpoint of the investor.(who then pays income tax in the already taxed income.)

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          7. “Of course they are just another cost of doing business from the standpoint of the investor.”

            Now you are just playing with words. Income tax is NOT a cost of doing business. They have no effect on the wages, prices and costs that are costs of doing business. Those are – or should be – determined by market forces. That means they cannot be passed on to consumers or employees to pay. The only way that corporate income taxes can effect economic decision making for investors would be if income taxes were different on different industries.

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          8. Again you miss the point. And you’re supposed to understand finance.

            The investor’s profit is his dividend. Corporate taxes come out before dividends so they reduce his net profit.

            It’s not the effect of taxes on different businesses that makes a difference.

            Businesses with higher risks require a higher net profit (dividend) to attract investors. Were that not so, people would just invest in savings bonds. We accept higher risks in pursuit of higher returns.

            So, inherently risky businesses, like small oil companies and drug companies must have higher returns that stable businesses like grocery chains.

            The income tax rate may be the same, but the required net return is not.

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          4. “The corporations don’t pay taxes half”

            yet they get to use, free of charge, the same things WE, the People, have paid for.

            Yeah, that’s fair.

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          6. So says Citizens United. But that is another bad SCOTUS decision.

            And I just re-read the back and forth here. Where you stated “The corporations don’t pay taxes half” in reply to my “Which half” question to Mr. Roberts. Your answer does not address what I said about loopholes and gifts.

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    2. RE: “It has become so bastardized…”

      That’s a true fact. In a way, the tax code has become a vehicle for propaganda.

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          3. Because you can’t. A lot of your posts are wastes of time, but they need to be addressed because silence on them would be almost as bad as your posting them.

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  3. As mentioned our tax systems, federal, state and local, are almost the definition of fiscal chaos designed to favor the few with enough complications and deductions to satisfy the mob.

    We should scrap the tax code, then decide what we want the government to provide or fund. Calculate what it takes to do that, then rebuild the tax code accordingly.

    Ha, ha, ha.

    We can do pay-go, what Democrats try to do but often can’t.

    (In reality, the tax code is so lopsided as to leave an impartial observer scratching his head. Such loopholes as “all companies that are located on the 2300 block of Granby Street that make rubber balls get an exemption…yada, yada…”.)

    We can’t even agree on at least enforcing tax codes, so the IRS was way understaffed. Never mind what we consider important priorities for the vast majority.

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          3. “Article I section 8 as understood at the time the Constitution was ratified.”

            Sorry, Don. This country is no going back to 1787, as much as you would like it to.

            Liked by 1 person

          4. “I believe that the Constitution is fixed in its meaning, I believe that it’s appropriate to look at the original intent, original public meaning, of the words when one is trying to assess because, again, that’s a limitation on my authority to import my own policy.” – Ketanji Brown Jackson

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          5. Article One Section 8

            Gives Congress the authority ” to provide for the common Defense and general Welfare of the United States”

            Providing for the “general Welfare” is repeated here after having been identified in the Pre-amble as one of the purposes for the new Government. As much as people think they can spin away such words (as they do with “well-regulated militia”), there they are.

            Oh, I know that some will say that “general welfare” was understood differently in 1789 than we might understand it today. There is no reason to think so. Words have meanings and “welfare” is no exception. The definition set forth in Samuel Johnson’s dictionary of 1755 is indistinguishable from its meaning today to wit: “welfare: Happiness; success; prosperity.”

            It is obvious from this broad and Constitutional purpose that anyone thinking that a limited enumeration of “true Constitutional functions” is even possible is deluding themselves.

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          7. “Well, you’ll have to argue that with Justice-in-waiting Jackson”

            Why would I argue with her?

            Do you not understand these words YOU quoted. . . “original public meaning, of the words”

            I have provided the dictionary meaning in 1755 of the word “welfare.”
            You do not get much more “original” than 1755.

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          8. Sure, but the Constitution refers to the welfare of the republic, not individuals. Note she said the public meaning, not the dictionary meaning out of context.

            No one in 1787 conceived of the idea of government providing people the things they were supposed to earn for themselves. The Constitution was intended to establish the Rule of Law so people could provide for themselves in safety. Welfare in the sense you mean it is a concept that would not be born for another 150 years.

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          9. There you go again. Twisting words.

            First, no one has claimed that the Constitution was addressing the narrow and modern use of the word “Welfare” as in “Welfare Queen.”

            Second, saying that the purpose to “promote the general welfare” refers to the “welfare of the republic” and not to the “general welfare” of people in it is a dog that won’t hunt. It does not even make sense.

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          11. “[The republic] is the contract between the people to govern themselves.”

            A “republic” is a nation which is not ruled by a hereditary monarch. Period.

            Libertarian/Federalist Society special definitions such as the one you propose are plain nonsense spun up to avoid the clear meaning of simple words. The Constitution may be thought of as “the contract between the people to govern themselves” and the purposes of that contract are clearly stated. One of those purposes is to “promote the general welfare.” And by that was meant to promote the “Happiness; success; prosperity” of the people entering into the contract.

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          12. The lack of a king is not what makes a republic. A republic has limits within which the government can act,

            So, the General Welfare clause, as understood by the man who wrote it, isn’t what it was generally understood by the public at the time.

            Did you even read the abstract on Federalist 41?

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          13. Sure, I read it. And I have read Federalist 41. The Federalist Society has taken great liberties with their interpretation. It is NOT a definition of what “general welfare” means. It is a response to the criticism at the time that such language would create unlimited powers for the new government. His answer to that is twofold.

            First, that the words must be taken in the context of the entire Constitution which protects rights and limits powers. So, the new government can promote the “general welfare” but only using the powers it was given. (That does not change the meaning of “general welfare.”)

            Second, he argues that the existing Congress (under the Articles of Confederation) had a similarly broad charter to “promote the general welfare” limited in a similar way so this was nothing new.

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      2. RE: “A flat consumption tax would be ideal.”

        Inflation caused by printing money to cover government expenses would be a very efficient form of consumption tax. Theoretically, at least.

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