Governments historically burn tax money instead of spending it

In American colonial history, several governments employed a practice of burning paper money that was received in tax payments. This approach was part of a broader strategy to maintain the credibility of paper currency in circulation. Taxes were instituted to redeem paper notes rather than to generate revenue, reflecting a unique understanding of money's function and the relationship between tax policy and currency management. For instance, an act enacted in Virginia in 1760 specifically mandated the destruction of treasury notes received by the government to uphold the value and trustworthiness of its currency. Such actions were conducted in various colonies, where authorities recognized the necessity of ensuring that the paper currency maintained its legitimacy. The idea was that destroying the money would reinforce its value and public confidence, rather than allow it to circulate and potentially contribute to inflationary pressures. Alongside this practice, governments also instituted legal frameworks that deemed such paper currencies as legal tender for tax obligations, further entrenching the state's role in dictating monetary standards. This combination of acceptance as tax payment and simultaneous destruction played a vital role in shaping public perception of government-issued currencies. However, the framework of Modern Monetary Theory (MMT) misinterprets these historical practices, particularly its fundamental assertions regarding money's origin and the role of taxation. Advocates of MMT posit that a government's ability to create money is intrinsically tied to its capacity to levy taxes, and that the obligation to pay taxes gives fiat currency its value. Contrary to this perspective, historical instances demonstrate that market-selected forms of currency preceded government fiat. The acceptance of government-issued paper money was often tenuous and hinged on public trust in redemption promises rather than taxation alone. In summary, historical analysis reveals that governments' practices of burning currency received in taxation were rooted in an attempt to bolster the credibility of their paper money systems. This not only served to affect monetary policy but also called into question many contemporary interpretations of money's role and value derived through state mechanisms. Thus, the historical context provides crucial insight into once-standard practices that shaped the evolution of monetary systems in the United States and underscores how the understanding of money and its functions is often steeped in complexity and nuance.