I will say it again for the cheap seats, it doesn't matter how much money a country has. It's how much stuff it can produce. This is the beginning lesson I would always start my economics class with because not only does it simplify economics incredibly well, but it's true. It is the stuff your country produces that determines its economic success, not the amount of money it prints.
However, an interesting, but simple thought crossed my mind. Why haven't we ever incorporated inflation into the federal tax rate? The money IS controlled by the government/fed and since stuff is the only thing that matters then inflation SHOULD DEFINITELY be considered when attempting to calculate one's level of taxation.
Of course we need to define things (so leftists can disagree with semantics instead of grow a spine and deal with the argument) but I think you'll find the results interesting and of course enraging.
First the TRUEST measure of the overall tax rate of a country is taking TOTAL government spending at ALL levels of government (state, federal and local) and then dividing it by the country's total economic production, GDP. Now leftists will argument it should be REVENUE as a percent of GDP because people don't pay the full effective rate at which governments spend. We borrow money from other people and in running these deficits we provide an effective lower rate of taxation.
Which is true....for now.
Because in the end that debt has to be paid back with either:
1. Future taxation or
2. Printing off money/inflated away (which again is nothing more than indirect taxation)
So true and intellectually honest economists look at what has to be paid, now and into the future, to see what the real rate of taxation is.
Second, there is not a lot of data about total government spending (including both federal, state and local) that goes back significantly to provide a decent historical look. Ergo, I used only federal data which goes back to 1960. Still, if you want to be ever so rough about it, tack on another 15% GDP for state and local (47% for California and New York) and you'll get a rough proxy of total tax rates when we include the diluting effects of inflation on our currency.
Finally, what is "inflation?" If you're a Keynesian you (once again) stumble over yourself to cite the CPI. But if you're a technical person you would look at the money supply as any increase in the numbers of dollars, by definition dilutes those already in currency lessening their purchasing power (arguments about what is sitting in banks vaults as capital and not currently in circulation in the larger economy duly noted).
Regardless, when you do the math looking at the annual increase in the M2 money supply (orange) and add it on top of the federal tax rate as a percentage of GDP (blue) the results are quite interesting.
When "inflation is considered you can see it is at times a VERY significant tax, sometimes being even more costly that state/local taxes. The oil embargo/inflation days of the 70's and early 80's are very noticeable as well as the jump in the money supply during the financial crisis. And when you tack on the roughly 15% state and local tax, you're looking at a total government take of about 42%-45%.
Thankfully, the inflation tax (like debt) is a deferred tax that future generations will get to deal with. The US is once again VERY lucky to be the world's reserve currency and we're also very lucky that pretty much any other significantly sized economy is in worse shape that we are. This makes the US dollar a "safe haven" for people who are not so much worried about the value of a dollar, but just want a currency perceived to be more stable than their own. This effectively "ships" US dollars overseas where they can no longer cause inflation in our domestic economy and why is your Apple product still costs as cheap as it does.
But don't worry, either through future taxation or inflation, the aforementioned rates above WILL be paid, and quadruply so by future generations who were nearly completely innocent.