| ▲ | JumpCrisscross 14 hours ago | ||||||||||||||||
> it's highly useful to have the currency that ~300M people with the largest tax debts in the world need The drivers are consumption and investment. Not taxation. If you want to sell to the richest consumers in the world, you get dollars. If you want to finance something from the deepest financial market in the world, you accept (and repay with) dollars. (Both of which drive demand for, and thus deepen liquidity around, dollar-denominated financial assets.) Demand for currencies and the level of taxation are barely correlated. | |||||||||||||||||
| ▲ | mothballed 14 hours ago | parent [-] | ||||||||||||||||
I'm not sure why you would expect linear correlation with taxation. Sitting in a jail cell is just as bad whether it's because you owe $1M in tax evasion or $1B. You're conflating backing of violence (which isn't well correlated with actual tax rate, so long as it's above zero so that people have to pay taxes in USD) with backing of nominal taxation. USA provides more goods and services in nominal value than any other country. The people providing those goods and services have the threat of jail for not paying taxes. Even if you pay them in something like gold they have to account for the USD value and then pay taxes plus taxes on any appreciation vs USD, so there's too much friction for them whether taxation is 10% or 30% not to just accept dollars. Many would probably like to be paid in gold or something but they still have to get USD to settle the debt so you end up with "other thing" + "USD" no matter what, forcing USD as a lingua franca when all those "investments" and "financial markets" settle. Taxation is the underlying "backing of violence" that helps makes USD so attractive. It's not the level of non-zero taxation but the level of mass potential violence against a large body of relatively productive people for not paying taxes. The IRS will raid someone just as easily no matter the tax rate, so I wouldn't expect raising taxes to do much to raise global demand for USD because the level of violence backing it doesn't change much. | |||||||||||||||||
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