this post was submitted on 14 Jun 2026
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Wealth disparity also causes inflation - because wealthy people can and do drive up prices on goods, sometimes buying up whole markets/products. On top of this, they like to avoid taxes. Taxation being deflationary because taxes take money out of circulation, so uber wealthy people can completely, and enmass buy up select materials/property driving prices up (see the price of graphics cards and memory during the AI boom), and they halt the deflationary effects of taxation by avoiding taxes....
...and the wealthy are also likely to corrupt politics, skewing results in their favour - often shifting burdens onto the poorer classes or otherwise worsening conditions for the rest of us.
Basically: large wealth disparities are bad for the economy, bad for society in general, and bad for democracy, fairness, justice, and equality.
Taxes don't take money out of circulation, they just give the government more to circulate
That's a misapprehension of how taxes work. Let me put it this way: You need a currency BEFORE you can tax in that currency. So Money and Spending comes FIRST.
Money isn't created "when the government collects taxes" not at all (it actually dies when taxes are collected, that's a zeroing mechanism of economies). Having a "sovereign currency" means the government has the SOLE RIGHTS to printing that currency. That's how money is created. "Tax Revenue" is when money "returns" (which is what "revenue" means - it's a receipt of payment made) it zeros out money that was already spent.
This is because all money is debt, it's created as debt. Taxes return the debt to the debt holder (The Government, who invested in starting the currency). Taxes are always covering things that have been done in the past.
I mean, let's say you have a colony, it's a small colony and doesn't grow much, and there's 1 million dollars in circulation. The government has a project there, that will cost 1 million dollars to complete (it's a new colony, they want to pave roads, build bridges, and install public infrastructure). IF they JUST printed the money, and paid the trades people/workers to do all this, there'd suddenly be 2 million dollars, in a small economy whose natural growth/circulation/trade was only at 1 million dollars. This would double inflation over night. Causing massive price increases, devaluing the currency, corrupting wages, and basically pissing off everyone.
So what do they have to do? They issue a tax, that they believe will pull approximately 1 million dollars out of the system. The taxation didn't CREATE money for the government to spend (that would increase inflation), it killed off money.
So taxation is a form of wealth re-distribution, and is where money as debt ends up (if you're trying to run a balanced economy with a natural growth rate). So when the wealthy refuse to pay taxes, they're cheating the system, contributing to inflation, and refusing to re-distribute any of the wealth they've stolen from underpaid workers and tax paying citizens.
In short, taxes don't pay for things. Money is issued by authority of the government alone (sometimes called an "appropriation"), and then taxes (ideally) zero out over spending not in line with value/market growth.
It entirely depends upon how the government uses that money. Paying down national debt is entirely deflationary; they are literally removing money from the economy. Spending on services can be very mildly inflationary, but usually also increases quality of life for the most marginalised and therefore reduces the impacts of inflation on those who feel it most. It can also be deflationary when spent on services, especially if those monies are spent on the government shouldering costs that have been pushed onto the average citizen (single-payer healthcare, energy costs and the like).
By far the biggest upward effects on inflation are caused by corporate greed and geopolitical instability.
I see you're on my instance so using Australia as an example - national debt is not getting paid down and is growing year on year. There is therefore no monetary deflation being applied. This has been the case since the GFC, debt has only really been growing
That’s why I specified in my first sentence that it depends upon how the monies are spent. I outlined a few different ways in which government spending impacts inflation.
Just paying down interest on national debt (as we have been doing) is just as deflationary as paying down principal, given that it’s removing money from the economy.
Where the money goes to holders of treasury bonds who then spend it again
Those who hold treasury bonds don’t tend to spend the interest on their day-to-day living costs. Those who hold treasury bonds use them as an investment vehicle, whose proceeds are usually either reinvested or invested elsewhere where the effects of investment aren’t inflationary. Many treasury bonds are also held by the international community, who by definition don’t spend those proceeds within the country whose bonds they hold. Domestic Australian retail investors make up such a small fraction of total ownership and, those that do own them in this context, tend not to use the proceeds as regular income that would be inflationary.
No