Since taxes paid to the federal government are excluded from the money supply, wouldn't getting rid of the income tax cause another huge increase to m2 supply & another round of wicked inflation?
Just curious on thoughts here. This gets into levels of economics that are mostly beyond me but it was brought up to me recently & my pea brain can't reason out why that wouldn't happen.
It will probably cause some inflation due to people having more money to spend. It should even out in 1-2 years though, because goods production will increase to take up the slack.
The covid inflation was a pretty extreme event. Vast swathes of the economy were shut down or hindered by lock down measures. This was compounded by stimulus payments in the neighborhood of $4.6 trillion, most of which had to be funded through new money (added to m2). Additionally, many people were able to deffer rent and mortgage payments. More money chasing fewer goods resulted in higher inflation.
By comparison, total income taxes in 2024 was around $2.2 trillion - less than half the covid stimulus. Whether this results in an increase of m2 depends on how much Trump can cut spending and raise taxes through other means ( e.g. tariffs.) Additionally, there should be no negative impact on production, so there should be a much smaller supply - demand imbalance. It's difficult to predict the exact result of a change this large, but I would expect it to be less than half the covid inflation, and possibly no measurable change.
Ok, gotcha. Thank you. I don't foresee tariffs & cuts compensating enough to complete negate their need for income tax, so maybe it would end up being a more gradual process.
Martin. Armstrong said, the US can print money as much as they want, we don't need income taxes. He is against tariffs which he believes to cause inflations. I like him although I know he is not popular among BTCers.
I don't know anything about macro economics. Not sure he is right or not. The part 'money can be printed' made sense to me.
I think tariffs would only cause temporary inflation, driving most important production back to domestic & making imported goods fancy again.
I don't know much about it either, mostly just what I absorb from the people around me. I'm curious to see where this all goes.
Tariffs would balance the equation of more money in your pay from no income tax.
The price of everything just went up but my income tax just disappeared.
It's complex. I believe it's often a fairer tax because it's based on consumtion rather than earnings which can be distorted via good accounting. It definitely has better incentives than income tax.
It also penalises low income earners since their increased prices aren't offset. Think really poor people, waitresses, the homeless & retirees.
If you think about it, it's a clever way to tax the asset rich & income poor boomers. You'd also get the soon to be rich Bitcoiners who haven't connected to the circular economy.
💯 if a tax has to exist, the fairest of them is a consumption tax. I think some sort of sales tax in addition to tariffs would be necessary to minimize inflation, but it would end up being the same pain, just a different flavor for lower income people. Eliminating income tax double-penalizes the poor, in a weird way , because that tax acts as an involuntary saving account to cash out on once/year. So instead of repairing a failing vehicle, they'd be paying noticably higher prices with nominally higher wages. (Not that I don't support the idea, these bandaids have to come off at some point.) The real concern would be that income tax comes back under some other future administration & the sales tax doesn't go away. Because that's how the feds roll 😅
