Federal Taxes Do Not Fund Federal Spending

http://www.nakedcapitalism.com/2014/05/randy-wray-taxes-mmt-approach.html

http://bilbo.economicoutlook.net/blog/?p=9281

The subject line is a different but more accurate way of viewing taxes and federal spending.

True at the Federal level in a debt based monetary system.  The direct result of Federal Tax is to extinguish debt based dollars from the monetary system.  That is an independent function.

Extinguishing debt based dollars through tax collection.

Created new dollars to spend by selling government bonds.

The Total National Debt is equal to debt based currency in circulation.

Collect  more money in Federal Tax, take it out of the total Debt based currency amount than is created by new debt bonds to replace money extinguished by Federal Taxes and the Federal National Debt decreases.  Less Federal Tax than is created by new debt bonds sales and the National Debt increases with more money in circulation.

Is that how it all works?

Looks like it to me.

One way of running a monetary system.

The other way is Asset Based Federal Currency system.

Federal Debt Free Currency created with a unique identifying attribute and value (like a paper dollar bill but digital) as an asset with no counter balance of debt creation on a balance sheet (debt free)  once created never goes out of existence.  It can only be withdrawn from circulation by Federal taxation and held in reserve as required to maintain the monetary base.  Uniquely identified Federal Currency in the debt free monetary system retains its dollar unit value and identity while in reserve.  It may re-enter currency in circulation by government spending to move it from reserve to circulation.

In the debt free system new currency would be created when reserves were insufficient to meet currency in circulation requirements.

Federal Taxes in a debt free currency system would not fund Federal Spending.  However for currency accounting control purposes the actual debt free dollars could be directly linked to their tax that took them out of circulation and government spending that put them back into circulation.

Sounds like an idea to me.

Fixed the currency system for ya!!

Some good thoughts on a debt free monetary system here:
http://www.financialwarhighway.com/federal-reserve/507.html