That’s a neat explanation of taxation, but somehow, I’m not entirely convinced it does apply to our modern system for two reasons:
1/ Money is created by the central bank, which in most modern economies is an independent body. (At least, that’s how the story goes. It’s debatable whether for instance the FED or the BoE are really independent from their respective governments. The ECB is though, much to the ire of the Germans.)
2/ Most of the money nowadays is created by private banks, not the central bank. So, to make your story complete, you have to say something about the creation/destruction process of that money.
Also, as an additional point, what do you think of Modern Monetary Theory?