In America, tax cuts lead to inflation but only a year or two late. We are suffering now and blaming everything but the tax cuts and handouts for companies.
I would find this surprising. Do you have charts for this, and which historical timeframes?
An increase in the money supply comes about only if (1) taxes are cut, (2) spending isn't cut, (3) the central bank buys the bonds issued as a result, creating the money to do so out of nothing.
A deficit financed by selling bonds to the public might perhaps increase expectations that sometime in the future the central bank will buy bonds using newly created money, but that is likely to have a more muted effect than them actually creating money now.
The process is known in economics as "monetizing debt". That this is a thing that central banks can do, and do do, is not in the least bit controversial.
I.e. tax money I would think eventually circulates back into the same pool, same pool non-gov entities trade in.
My intuition tells me the total pool size available at any given moment shouldn't be drastically different and wouldn't be correlated to tax amounts in an obvious way.
Not sure if I'm explaining myself well
During World War II, the Canadian government raised taxes in a bid to reduce demand and curb inflation (along with wage and price controls, mandatory savings, and other measures).
Inversely, reducing taxes holds the potential to leave money in people's pockets, increase demand, and trigger inflation. Whether it does so will depend on a host of other factors, of course.
It may seem intuitive, but it does not match what happens in the #1 economy which issues the reserve currency of the world.
> A decrease in the price of money is inflation.
Federal Reserve sets price of money by manipulating interest rates. Federal Reserve is increasing interest rates and consumer prices and producer prices are increasing. This may contradict your belief about what causes increased prices.
With a tax cut, US consumers have more money which they spend on imported goods. This supplies dollars to the rest of the world, increasing the value of 196 currencies marginally. You can think of USD being in demand from 8 billion people.
If US dollar wasn't a reserve currency, a tax cut would have increased supply of dollars with consumers but demand would only be from the 330 million people in America. High supply of money, no change in supply of goods would then cause inflation.
So the dollars go overseas buying imported goods and then partially those overseas dollars buy USA treasury debt. This puts the price inflation, if any, overseas and then "sterilized" into Treasuries. This is why USA consumer prices and gold didn't go to the moon after 2008 bank bailouts.