What if and Why of Zero Taxation

["John Gelles" <johng@xxxxxxxxxx>]

        Berglund, Hummel and Winslow almost reached
        the "why" of this subject on the 'Korean War two
        currency' thread.


        -- If no taxes were collected than government
            spending would either keep adding new money
            to the economy or government would have to
            borrow old money from firms and individuals
            to match its spending the way taxes can. --

                Paraphrase of Per Berglund

       --  Zero tax revenues would require that the
            Treasury finance its spending by borrowing
            from the public or from the central bank. --

                Paraphrase of William Hummel

        The above mention of "what if" does not make
        explicit another form of borrowing that would
        allow the Treasury to spend budgeted money
        without balancing it to budgeted tax revenues.

        Such form of borrowing could be public savings
        deposited with the Treasury.

        Now to the "Why":  IF instead of paying taxes,
        taxpayers only saved the same amounts, the
        taxpayers would feel comfortable. Saving in
        lieu of taxes would be seen as protecting the
        value of money -- not taking the shirt off a
        taxpayer's back.

        When the time came for taxpayers to spend
        some of these savings, the economy would
        have to have grown in the output of things to
        buy sufficiently for such spending to have
        no effect on price.

        This appraoch to zero taxation highlights the
        main purpose of taxes as a tool to prevent
        hyperinflation. Savings deposited with the
        treasury do the same thing.

        If we would avoid deflation and recession,
        we should also avoid taxes.

        If we would avoid high inflation and hyper-
        inflation, the use of such special savings in
        place of taxes will have to be well managed--
        there may be times when spending of such
        savings would have to be temporarily
        controlled.