Thread by @banglani

Can someone who knows economics help me understand this:

Why does the government need tax revenues? A sovereign can print as much money as it wants. It can simply announce in its annual budget that it will print so many rupees to spend in the next FY.

Sure, the value of money will come down proportionately (like share price when a company issues new shares), but that gets baked into the budget. This "dilution" ( inflation) reduces the purchasing power of the currency, and that acts as a constraint against printing too much

But a fiscally responsible government can balance its budget with "new money" and borrowings alone. It doesn't really *need* taxes of any kind.

The only underlying reason for taxes I can think of is redistribution. Take from the rich and give to the poor. For a given amount of public goods provided, the rich pay more and the poor not at all. If new money were created, everybody would pay proportionate to their wealth.

If this is true, it follows that a poor country like India should not have too many direct tax payers. If the goal of taxation is simply to redistribute, "casting a wide net" is counterproductive. Then why have successive governments (and particularly this one) focused on that?

This also raises a question on indirect taxation:a single GST rate (or a small number of rates) is like having no indirect tax at all, because everyone suffers proportionate to their consumption. If we want the rich to pay for public goods, a wide disparity in GST rates is needed

I would like to understand flaws in my logic. Since every government taxes economic activity, there's surely a bigger reason for it than redistribution. Also, more equal societies should then tax less, but in reality Scandinavian countries charge higher tax. What am I missing?