ot of what you're saying doesn't really make sense. Firstly, the amount of seniorage, which is money debasement, relative to the income tax collected in developed countries is really low. Like, maybe money printing accounts for 10% of tax generated through direct taxes. This can be higher, like maybe 20% in developing countries, or 50% in hyperinflation countries. But in developed countries, it's a really small amount. So you can't really say that governments need to print money to get the country going and cover expenses. And that if the government just raised taxes a little bit more, that would mitigate the need to print money at all. Like, you have to have one or the other. Secondly, no, the government couldn't raise tax effectively if Bitcoin was the standard. Because the transactions would have to be traced, and privacy measures would mean that it would be very difficult to trace Bitcoin to collect tax on it.
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Raising tax on the rich instead of inflating the currency would be far more popular in a democracy among the poor and middle class in the short run because the tax burden wouldn’t fall on them.
Maybe I'm wrong, I don't know 😔
It’s ok, I think you’re partly correct. It’s just that there’s no magic if you get hard money, where you somehow get all the benefits of a deflationary currency but none of the drawbacks of the government not being able to gain purchasing power to help fund the public sector. Smaller governments can be just as good if they are more efficient, but a small government with the same efficiency as a bigger one will mean less government services, and so you’ll just have to pay for that.
And then there’s the big problem that if the government has no way to raise capital quickly to fight off an invading fiat empire, they will be invaded. Not in the US psyche at all but kind of ironic that they complain about money debasement that contributes to their military strength.
There is a situation like you talk about- large tax base but also deflationary money, although as I said that would be very difficult on a bitcoin standard due to the problem of how to tax encrypted peer to peer transactions. But lets say the US government decided to cap the US money supply or introduce a new hard USD regardless of consequences, you of course could fund a government on direct tax alone and it wouldn’t be much of a loss (say 5-10%of tax base) if you couldn’t also print money. The issue like I said is it would mean the government would have to constantly fire or rehire government employees and programs because they couldn’t print money to avoid bankruptcy.