Taxes exist to give value to money. Basically, when a government prints money, that piece of paper has no inherent value. You can conduct your business in seashells if you so decide.
However, at the end of the year, you’re going to want to convert your seashells into your government’s currency in order to pay your taxes. And that is what gives the currency value. The amount that is taxed depends on how much liquidity there is in the economy. If there’s too much money around, higher taxes would reduce that.
This is a fairly poor explanation of how it is, you could read “Macroeconomics” by Mitchell, Watts and Wray for a more in-depth explanation including historical examples using “sticks” for taxes.
Taxes exist to give value to money. Basically, when a government prints money, that piece of paper has no inherent value. You can conduct your business in seashells if you so decide.
However, at the end of the year, you’re going to want to convert your seashells into your government’s currency in order to pay your taxes. And that is what gives the currency value. The amount that is taxed depends on how much liquidity there is in the economy. If there’s too much money around, higher taxes would reduce that.
This is a fairly poor explanation of how it is, you could read “Macroeconomics” by Mitchell, Watts and Wray for a more in-depth explanation including historical examples using “sticks” for taxes.