Where did you get the idea that taxation reduces the money supply?
How the money supply is reduced is when the Federal Reserve raises interest rates. Then when the interest they collect comes back to the Fed they burn the excess dollars.
Taxation does takes money into the government but the buck (in deference to Harry Truman) does not stop there. It does create a negative impact on the economy but not because the currency stops there but because it is an expense on the tax payer who could have spent that money on something that produces wealth.
Government employees get paid, government debts get a little, the military, welfare and other social programs get money and money the money ends up in the hands of individuals who spend that money. The money keeps circulating in the economy. The problem is that when the government steals your money it does nothing to create wealth, instead it destroys wealth. Wealth is not money.
I'm keeping my fiscal conservative card, thank you very much.
The situation we've been in ever since Obama is that if the Federal Reserve raised interest rates to the level they need to pull back the the money supply they will collapse the economy. However, if Biden and the Fed keep happily printing money like there's no tomorrow they will collapse the economy. We're stuck between a rock and a Democrat place. But then that's been the goal all along. That's what the Great Reset is all about.