Originally Posted by
rpcas
Once you go right back to the basics and think about the purpose of a tax, you start to get a better idea of which taxes are well directed. The purpose of a tax, despite common belief, is NOT to fund government spending, but rather to create demand for the currency and to regulate aggregate demand (restrict inflation). Quite clearly, the government actually believes they must tax or borrow in order to fund spending (this is not the case for a sovereign government that issues its own non convertible currency, with a floating exchange rate), therefore they enact tax policy with the idea that the more tax revenue, the better. This is all misguided.