Why Taxation Is (Largely) Unnecessary

The worldwide Covid lockdowns saw governments printing money and handing it out to individuals, families, businesses and corporations. Printing in this case means quantitative easing. Although often referred to as printing money electronically, QE is actually a lot more complicated than that. Here is a detailed explanation from a UK perspective. If you find that difficult to follow there are many videos on especially YouTube that explain the process simply or in great detail.

Exactly how much money did the Federal Reserve print? In December last year, the headline of a Tech Startups article read 80% of all US dollars in existence were printed in the last 22 months (from $4 trillion in January 2020 to $20 trillion in October 2021).

That is a staggering figure; if it isn’t 100% accurate, it can’t be far off.  Yet we are now told the US Government is to hire another eighty-seven thousand IRS agents and to spend tens of billions of dollars for this and for compliance. Some sources have suggested this is fearmongering, but recent experience has taught most of us to be wary of so-called fact checkers. That being said, there is a massive inconsistency here which few people seem to have noticed. Namely, if the Government can give away trillions of dollars through the Federal Reserve, why does it need to collect billions of dollars through taxation? Couldn’t it simply print the money required?

The usual response to that claim is that printing money causes inflation. Not so! Printing money without any consideration of the goods and services in circulation causes inflation. If not enough money is printed, what then; more to the point, have you ever heard of anyone complaining about having too much money?

Obviously there are limits. If all the world’s financial problems could be solved simply by printing money then governments could print it to their hearts’ content. The hyperinflation experienced by particularly some African nations is proof of that, but we shouldn’t allow ourselves to be frightened away from the subject by claims of a new hyperinflation.

As long ago as 1937, the Australian Royal Commission On Money concluded that the Commonwealth Bank could loan money to the Government without interest, indeed without repayment of the principal. In other words, the Government could fund itself at no or minimal cost (for essential public works). 

In 1981, the Economic Research Council made a similar claim/suggestion for the British Government.

Again, there are limits, but basically there are three ways to fund a government, any government: taxation, borrowing, creating its own credit. Creating its own credit is always the cheapest because it can be done at literally no cost while borrowing incurs repayment (at interest) and taxation not only reduces the spending power of consumers but requires tax collectors and others to be paid.

The bottom line is that all governments should create credit debt-free and interest-free as far as possible for public works and services.