Thread by @ChayuDamsinghe

A quick thread on how government expenditure is almost always paid for the people - in 1 of 3 ways

#SriLankaEconomicCrisis #SriLanka #lka (#GotaGoGama #GoHomeRajapakshas #GotaGoHome2022 #අරගලයටජය for reach)

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Whenever a government has an expense, it's paid in 1 of 3 ways.

1. Taxes
2. Loans
3. Money printing

Despite what it looks like, taxes are often the least anti-poor

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Let's start with money printing - I explained it detail here but what matters is that excess printing just results in inflation.

https://mobile.twitter.com/ChayuDamsinghe/status/1514092187000061953

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Now inflation is bad for everyone, since it reduces the value of your money - in effect, a post-printing "tax". You're paying for the printing in the past, with reduced money access today.

But this affects the poor the worst.

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This is especially true since inflation is often hard to control AND requires measures that further hit the poor in order to control it. So it's really bad.

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Loans are paid either with other loans, or eventually through taxes or printing again.

If you keep borrowing forever, great, but eventually if it crashes, then you end up in the printing cycle again OR see a huge recession, again hitting the poor most.

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That leaves you with taxes. Now taxes, especially indirect taxes, aren't pro-poor at all. They hit the poor more that the rich.

But the practical reality is, the other options are far far worse.

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Improving our tax system makes this better. But runaway inflation, huge debt costs and recessions, are just by all relevant metrics, worse than taxes. And the fewer taxes we collected, the more the others are needed.

https://mobile.twitter.com/ChayuDamsinghe/status/1515408134634078208

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So that's the thing. We can't avoid paying for what we get, it's just a choice of how painful we want it to be.

Taxes are the least painful option we have - and especially those of us who can, better pay to make it easier for the rest.

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