A Fair Taxation System
The reality is that tax does NOT fund government spending, all of which can in principle be funded by issuing currency or borrowing.
It is, of course, very unlikely that this would actually happen: inflation would rapidly destroy the value of a currency in this situation and the willingness of people to lend would quickly expire. This means that TAXATION, a necessary fact of economic life, is an essential tool to CONTROL INFLATION as it allows excess money to be removed from the economy.
The purpose of direct and indirect tax is to achieve a number of goals (funding government spending is certainly not one of them),
- Reclaiming the money the government has spent into the economy. To prevent excessive inflation.
- Redistributing income and wealth within the economy. Redistribution of income and wealth is an essential function of Government.
- Ratifying the value of money. Gives the currency created by the government its value in exchange and as a result passes control of an economy to the government that charges that tax.
- Reorganising the economy. To meet social and economic goals.
- Repricing goods and services. Markets cannot always price the externalities of the goods and services they supply or reflect social priorities.
- Raising representation in a democracy. It is important that people are in the system. When they are they want a say on how the system works and democracy is enhanced as a result.
Government spending is essential to deliver prosperity to its citizens and also provide a balanced and stable economy that benefit the many households and businesses not just the few. With a currency issuing sovereign government the UK can fund its own spending and use taxation as a tool to control inflation. When taxation is used to control inflation the burden should fall mainly on those strong enough to carry it.