If inflation is not a tax, then where does the value of newly printed or fractionally lent money come from? Money has no intrinsic value, it's a mere token -- if you add more tokens, the value of every existing token is suddenly lowered.
People not spending money is bad... how? This doesn't slow the economy any, nor does it freeze any value -- all it freezes is some _money_. Any money that's temporarily out of circulation increases the value of any actual assets that are in use.
As for borrowing costs, you got that reversed: if there's inflation, borrowing gives you an advantage by having the real cost decrease as time goes. With deflation, you need to actually pay to borrow.