| > The effect of taxation is precisely the same as that of destroying money No it's not. The effect of taxation is the same as theft. The thief gains and the victim loses, but the overall purchasing power of the dollar is unchanged. Destroying money would increase the purchasing power of the dollar. > On the other side of the transaction, for the government, as you recognize, taxation presents no increase in buying power. Taxation is one of three ways the government can earn revenue (taxation, selling bonds, or printing money), so yes it does increase buying power. > To directly compare the two scenarios - taxation and burning money - private entities can no longer use the money and government can still spend as much as it wants subject to self imposed limitations. There is no functional difference. Those two aren't comparable. Burning money would mean that nobody can spend that money. Money gained through taxation can still be spent (and is spent). If the government collected taxes but never spent that money, I would concede that the net effect is the same as destroying money. But that clearly doesn't happen. The government DOES spend the money it garners through taxation. So the claim that taxation destroys money doesn't make any sense. |
> The government DOES spend the money it garners through taxation
The government can spend the money regardless of how much it raises in taxes. Your taxes do not fund government spending.
Money is fungible. If government taxes $x and then spends $y, it is the same result as if it burns $x and then spends $y of newly printed money. In both cases the money supply changes by $y-$x