That’s actually not true at all. Raising taxes on the poor is less efficient exactly because they spend all their money. The purpose of taxation in this scenario is to increase buying power by reducing monetary supply. If you tax the poor, you weaken the economy because they are already spending all their money. The rich, who don’t spend all their money, are objectively a much better place to tax because it weakens the economy less through a lower decrease in spending. If you tax the poor more, the government ends up having to spend extra just to offset the loss of spending from the poor (which then increases the monetary supply, lowering the effectiveness of the tax).
To put another way, government spending is how the government can positively impact economy by increasing spend in targeted areas, but this spending causes an increase in monetary supply, which causes inflation. The offset to this is for the government to tax the money back out of the monetary supply, which lowers inflation, but if they tax the poor then they are decreasing overall liquidity (because the poor reinvest all their money into the economy directly by spending it). So from a monetary supply perspective, the most effective taxation would be on “idle” money, or a wealth tax.
pmtriste@lemmy.world 1 month ago
Oh, maybe I should address your comment from your perspective. I imagine what you’re suggesting is that microeconomically taxing the poor would combat inflation because they would have less money to spend. For one, I was speaking macroeconomically, not microeconomically. Speaking from a microeconomic perspective, if you’re assuming that supply is inelastic and demand is elastic, then lowering demand (by lowering the amount of free cash of people spending it) makes sense, except that the poor aren’t primarily spending money discretionarily. They spend money because they have to in order to survive. So decreasing their money doesn’t actually help to reduce their spending, because that demand is inelastic. You have to tax people who are making discretionary spending choices. From a “percentage of spending spent on discretionary purchases perspective”, you’re still taxing the rich, because at this point even the middle class is struggling.
iopq@lemmy.world 1 month ago
Of course it would reduce demand, poor people would just skip meals. Just because it’s not discretionary doesn’t mean they would still spend the money they don’t have
This has been found multiple times, giving money to poor people boosts spending more than giving it to rich people. So if you want to cut spending, doesn’t it follow you take it away from poor people? You can’t have it both ways
pmtriste@lemmy.world 1 month ago
I don’t want to cut spending, I want to reduce the monetary supply. It is extremely well documented and effective. And no they won’t cut spending, they’ll just go into more debt. Seriously, stop and think about it, the reason for inflation isn’t spending, it is monetary supply. That’s why when a government like Zimbabwe prints money like water, they have terrible inflation. We’re doing the same thing, and we CAN fix it by taxation. Taxation without imagining some stupid fantasy of “budget” that the Right (and “Left”) has been lying to us about. Taxation without government spending reduces inflation by lowering monetary supply, thus strengthening the buying power of the remaining currency. The government keeps huge discretionary budget spending which (along with obscenely low bank lending requirements) is what is driving up inflation. We need to cut stop wasting money on graft and war, and spend it only on the peopkebwho actually need it and in infrastructure investment.
iopq@lemmy.world 1 month ago
We don’t print money and give it to the government directly. How do you reduce the monetary supply when the money isn’t free to begin with? The government pays the money back eventually!
So we’re back to quantitative tightening and raising interest rates. Which reduces spending!