Forget the Pie, I Hate Taxes!

Tax Pie ChartI doubt any upcoming tax increase that doesn’t cover current spending levels will make any marginal difference in the economy. It’s the SPENDING that confiscates real resources from the market. Taking fiat paper money out of the market doesn’t hurt the economy as a whole.

The market is like a bidding war for a piece of the whole economic pie. In any given period the economy is capable of only producing so many goods and services, or “total pie”. If there are less dollars in circulation, portions of the pie will simply be bid off for lower amounts, or involve more transactions, but the entire pie will still be divvied up. However, when the government purchases portions of the pie we, the market economy, are left with less pie to share. It doesn’t matter how many total dollars the people were allowed to keep, there is less total pie to divide. Even if you keep 100% of your income, if the government consumes all of the pie, no pie for you!

The spending, even if it comes from printed money, is the tax on the economy. Inflation is an invisible tax that causes higher prices or shortages that you probably leaned to associate with the weather or “evil speculators”, but it is just as much a tax as the income tax. But also, beyond just being a tax, it also causes the Business Cycle. As such, the inflation tax may be worse than the income tax.

If the government is spending money they didn’t earn, they are stealing resources from someone. Just because inflation is hidden, doesn’t mean it’s less harmful way of stealing than direct taxation, in fact it may be worse. It doesn’t make since waste resources complaining about “increased taxes” when the taxes are simply being shifted from inflationary to direct taxation. The only tax you need focus on is the spending.

Steve Young

About Steve Young

Steve Young is a business intelligence software developer and DBA, and founder of UniversalPrinciple.org.
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