"That with Which We Pay Taxes": Where Does It Come From?

• Whence comes the supply of currency used to pay taxes?

  • Government must, as a matter of logic, first spend it into the economy

  • Government spends by issuing IOUs

    • Coins and paper currency

    • (Mostly) electronic credits to bank accounts

  • Only then do people have the currency with which to satisfy their tax liabilities

    • "Taxes drive the sovereign currency"

• Taxation, strictly speaking cannot "fund" or "pay for" government spending

  • The federal government does not have to accumulate tax revenue before embarking on spending

  • It's the other way around