A reminder that taxes don't fund the government they curb inflation. The government funds itself by printing money and taking out loans.
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Sort of. Modern monetary theory ignores any stocks of money or money-like instruments at the government, focussing instead on flows. Spending and paying debt is inflationary, taxing and issuing debt deflationary.
As an economic model it’s nice. As a policy framework in a democracy it’s nonsense. Practically nobody during the inflation scare proposed raising taxes to destroy cash.
They did though, they just don't call it that because it's implicit in the existing tax system and happens without any legislative action.
Capital gains tax includes a tax on inflation. If you own a $100 asset and its real value doesn't change but you have 10% inflation, its nominal value is now $110 and the next time you do a transaction the government will call this a $10 capital gain and collect tax on it, even though the real gain was $0.
Those gains also fuel wealth effects. Our tax take as a fraction of GDP has been flat since WWII [1].
An MMT anti-inflationary cash-destruction programme would involve hundreds of billions, perhaps trillions, of borrowing or tax increases (with no increase in spending). That didn't happen for obvious reasons.
The part that didn't happen is that the government then needs to not spend that extra money, or else it goes back into the economy and continues inflating prices.
Sure. From a real (really real relative) frame, taxes stayed constant [1] while spending blipped up [2]. From a nominal frame, taxes rose and spending ballooned with it.
We tend to adjust in the real frame, i.e. raise taxes or cut spending, because it’s simpler to specify the state’s needs in real terms (we want ten artillery rounds) than nominal (we want to spend $20,000 on however many rounds that might buy).
To reduce inflation they'd have to throw it in a furnace or otherwise prevent it from going to anyone who would spend it.
It's also implying that the government decides it needs ten artillery rounds and then allocates that amount of money, instead of determining how much money it can get away with spending/borrowing and then having various interest groups fight over who gets it. If it was the first one then there would be non-trivial periods when real government spending goes down because the need for some existing program declines and it gets reduced or removed without being replaced by anything, right?