Eli5 Why can’t the government just set aside money instead of deducting it from paychecks?


I was wondering why the government has to deduct taxes from us. Why can’t they set aside what they need to begin with? I think I don’t have an idea of how money truly moves…

In: 0

The main reason everyone wants and accepts money, which is otherwise a meaningless government issued token, is because tax liabilities can only be settled with the governments currency.

If you don’t settle your tax liability, you go to jail.

In order to settle that liability you need money.

Therefore people are willing to work for in exchange for a meaningless token.

Therefore the government can hire people to be police, judges, teachers, etc by spending their tokens.

Can you word your question differently? What do you mean by setting aside?

The government needs money to operate and to offer services. They get money by taxing people. There are lots of taxes, but income is probably the most important one.

The government doesn’t have infinite money, it needs to make money somehow just like everyone else (simplified).
The way it makes money is through taxes which people in the country pay.

They don’t have to take them out of the paycheck directly. In fact most taxes, like sales or property tax, are collected differently.
Paycheck deductions just prevent constantly having to go after people who didn’t set aside money for income tax and are broke when taxes are due.

If you mean, why don’t they print money and set it aside for themselves when it comes time to pay for things, then:

Hyperinflation. The more money in the system, the less each dollar is worth, the more businesses will charge for product and services. When people realize what’s happening, they hoard, driving prices further up. This vicious cycle is why governments, central banks specifically, keep a right control on how much of it’s currencies are in circulation

That’s exactly what they are doing – taking it from your paycheck and setting it aside to cover your tax liabilities.

Otherwise you’d have to do it yourself, and frankly most people would fail badly at that. The average person is just not very good with money, especially with maintaining long-term savings when they have immediate needs and wants.

The government deducting it up front makes our lives easier. Since we never even get it in the first place, there’s no way we could misappropriate it, either on purpose or accidentally or in a moment of weakness or desperation.

And also we don’t feel as bad when the tax bill comes due in the spring, because we’ve already paid most of it, or even overpaid and get a refund, which feels like getting free money, even though its ours.