By setting a levy or negative interest rate of 5 to 10 percent per year on high-denomination notes (there are various ways to do this), the government would be able to earn a large-enough stream of revenue to help offset the shortfall created by cash-using tax evaders. The effect would be a lower tax bill for all non-cheaters, both for those who generally do not use cash and those who use only small-denomination notes ($1 and €5s). In effect, the anonymity provided by $100s and €200s would now be directly paid for by the users of those $100s and €200s. Unlike an all-out ban on banknotes, financial anonymity would still be provided.

This is what inflation accomplishes, unless I am misreading something obvious? Keeping money out of financial system and hence anonymized means losing purchasing power to inflation.

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kbolino 7 months ago | parent [-]

Inflation is too uniform, I guess. Why not just take the $100 bill out of circulation?

Also, this seems to be falling into the classic fallacy that sovereign governments which control fiat currencies still levy taxes for revenue. Yes, it keeps things conventional and understandable to think that way, and yes, some forced circulation of currency via taxation is necessary to keep it alive, but broadly speaking, an entity like the U.S. Government does not need to collect tax revenue to function. The purpose of taxation at that level is to shape behavior and so effect policy outcomes via nudging. That still might justify a "high-denomination" bill tax, but let's not kid ourselves about "making up for lost revenue".

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gwbas1c 7 months ago | parent | next [-]

Do you mean that the government could merely print money instead of collecting taxes?

That would trigger higher inflation, which would have some very nasty consequences. Assuming you're thinking of the EU or US, it would effectively kill the Dollar / Euro's status as a global currency.

	▲	kbolino 7 months ago \| parent [-]
		Monetary inflation happens when the money supply grows too fast. To reduce inflation, the government pulls money out of circulation. Taxes are one way to do this, but not the only way. Interest rates are another way, and increasingly are the primary way.

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01HNNWZ0MV43FF 7 months ago | parent | prev [-]

> broadly speaking, an entity like the U.S. Government does not need to collect tax revenue to function

Really?

https://fiscaldata.treasury.gov/americas-finance-guide/gover...

> The primary sources of revenue for the U.S. government are individual and corporate taxes

Wouldn't it do almost nothing if it did not collect tax revenue such as income tax and land tax?

	▲	kbolino 7 months ago \| parent [-]
		The government needs money to spend. Fiat money comes from nothing. The government that controls the fiat money can produce it in any way. Taxes are a money sink, not a money source. Taking money collected as taxes to turn around and spend it is a traditional way of operating, but it only was necessary before because money used to be hard currency. Now money is not hard currency, and taxes-for-revenue are there because of inertia, not necessity. Eliminating taxes is not a viable option, but that has nothing to do with the need for revenue. Taxes force commerce to happen in a particular currency, taxes sink money to control inflation, and an effective tax regime projects governmental authority. These are all important and serve as valid justifications to maintain taxation. Then, as I said already, the form and amount of taxes also controls behavior through nudging. Viewing taxes as a source of revenue is correct in an accounting sense, but the government does not operate on the principles of accounting. Accountancy of a sovereign government's finances in the age of fiat money is just record-keeping; the government controls the ledgers, not the other way around.