The Fiscal Tightrope: Why Taxing Savings, Not Subsistence, Is the Only Path to Sustainable Public Finance

Tue, 07 Jul 2026 00:00:00 -0300

Introduction

There is a persistent illusion in public finance that governments can tax their way to prosperity. The temptation is understandable: raising rates on existing bases appears faster and politically simpler than cultivating new economic activity. Yet a growing body of theoretical and empirical evidence suggests that this illusion is not merely costly, but actively self-defeating. When policymakers tax beyond the margin of savings, when they extract revenue from households struggling to cover basic needs, and when they treat small and medium enterprises as cash cows rather than growth partners, they do not merely slow economies; they erode the very tax base upon which future budgets depend.

Taxation Theory on Leonardo Belén's Blog

The Fiscal Tightrope: Why Taxing Savings, Not Subsistence, Is the Only Path to Sustainable Public Finance

Introduction