Taxing the rich will pay for services

It seems many think that under a fiat currency, government services are not funded by tax revenue, but they are.

Under Modern Monetary Theory (MMT), government spends money first. In the US, that comes from the Treasury General Account (TGA). Taxation revenues are deposited into that same account. Any shortfall has to be authorised by congress as bonds to create the money needed. Technically, while the government does not need the tax receipts before spending the money, it relies upon eventually getting it to cover those expenses in the long run.

So taxing the rich more would definitely increase the pool of funds that could be spent upon government social support services like health care and education. Do not let anyone pretend that normal double-entry account balancing somehow does not supply just because the money is spent first. More tax revenue enables the next cycle to have more to spend without needing to increase the money supply via bonds which increases the debt.

Many argue that allowing the rich to have more money increases the amount that they can stimulate the economy with, but they do not. They hoard it in assets like property. The problem with that is that the money given to them has to come back in taxes and that can only then be from everyone else. Since the poor cannot provide it, it falls upon the middle class, who do not like that, and can make a lot of political noise about it. To avoid the political fallout, governments have to find other means, typically being sales taxes and others that disproportionally affect the poor the most.

Taxation does more than just fund government services, such as by controlling inflation and enforcing demand for the currency, but that does not detract from the necessity of taxes to fund government spending going forward. But those taxes have to be fair, in that they maximise the number of people who can live comfortably while being able to pay their share of tax required to balance the money injected into the economy. Progressive taxing does that the best, while avoiding regressive ones like sales tax.

Many argue over the justification for taxing the rich, but wealth is not gained in isolation. It is the result of a supporting government, paid for by taxes, which provides all the legal and bureaucratic infrastructure allowing a few to get a bigger share of the finite resources of the state. Often they have manipulated politicians to enact legislation that favours them and protects their property. Taxing is redressing the false propaganda that their possibly marginally better efforts compared to others entitles them to a far greater share of the common wealth.