Why Governments Prefer Inflation to Taxation

By Ludwig von Mises

All governments, however, are firmly resolved not to relinquish inflation and credit expansion. They have all sold their souls to the devil of easy money. It is a great comfort to every administration to be able to make its citizens happy by spending. For public opinion will then attribute the resulting boom to its current rulers. The inevitable slump will occur later and burden their successors. It is the typical policy of après nous le déluge. Lord Keynes, the champion of this policy, says: “In the long run we are all dead.”

But unfortunately nearly all of us outlive the short run. We are destined to spend decades paying for the easy money orgy of a few years. Inflation is essentially antidemocratic. Democratic control is budgetary control. The government has but one source of revenue— taxes.

No taxation is legal without parliamentary consent. But if the government has other sources of income it can free itself from this control. If war becomes unavoidable, a genuinely democratic government is forced to tell the country the truth. It must say: “We are compelled to fight for our independence. You citizens must carry the burden. You must pay higher taxes and therefore restrict your consumption.” But if the ruling party does not want to imperil its popularity by heavy taxation, it takes recourse to inflation.

From Omnipotent Government via The Mises Institute.