How the US Changed its Tax Policy and Now Overtaxes the Economy
Executive Summary
- The US level of taxation for most of the population is too high and leads to unused capacity.
- This is how taxation levels should be set to balance the utilization of resources versus triggering inflation.
Introduction
Taxes are not directly related to government spending as the government does not use taxes to pay for its budget. This is true when governments can create their own money (so this does not apply to EU member countries). Instead, taxes are used to create value for the government’s money and reduce private purchasing power. However, according to Warren Mosler, the present level of taxation, particularly on the non-elites in the US, is far too high versus what is needed to moderate inflation.
How much taxes have changed is explained in the following quotation.
“Today, unfortunately, we are being grossly overtaxed for the current level of government spending, as evidenced by the high level of unemployment and the high level of excess capacity in general. People working for a living are getting squeezed, as they are no longer taking home a large enough pay check to cover their mortgage payments, car payments, and various routine expenses, never mind any extra luxuries.”
Source: Mosler Economics