Many people believe that government spending of tax money creates an extra stimulus to the economy. This belief is wrong. Here is why: If a person earns e.g. $100 through work in the free market and the government takes away – say – $30 in taxes, the government can now spend the $30 for goods and services in the marketplace, while the earner (taxpayer) can now only spend the remaining $70. At best, the combined effect would be the same as if the earner had been allowed to keep and spend his/her $100. In either case, $100 would have flown into the economy to stimulate it. The part of the $100 that was taxed away and then spent by the government, produces no additional stimulating effect for the economy. . .
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