Inflation Tax


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Inflation Tax

A term used to describe the negative impacts of inflation. That is, holders of cash and other highly liquid investments tend to see their holdings decline in value over time due to the effects of inflation. As a result, persons who keep their money in a savings account may not save as much (in real terms) as those who keep the same amounts of money in IRAs.
References in periodicals archive ?
Thus, the choice of monetary policy faced by the BCRA boils down to the choice of the mix between debt and money, with the understanding that the only tax it can use to service the debt is the inflation tax.
Further, since the overall base of our exports is also fairly small, one needs to be careful in computing gains or in arriving at precise trade-off calculations between any gains in exports (through devaluation) and the likely economic fall-outs such as: increase in foreign national debt in rupee terms; decrease in underlying dollar value of market assets (for example stocks); increase in short-term foreign currency liabilities borrowed to support FE reserves (again, especially in our case); raising barriers to capital investment in the economy (especially in plant and machinery); distorting dollar based targets of annual corporate revenues; and last but not least, unleashing of a sort of involuntary inflation tax on the common man.
Increase in the legal age of sale of tobacco to 18 | 2008: Introduction of graphic health warnings on packs | 2011: Ban of sale of cigarettes in vending machines | 2011: Introduction of 2% above inflation tax on tobacco (2011) | 2012-2015: Ban on display of tobacco in shops | 2014: Offence for people to buy tobacco for under 18s | 2015: Ban of smoking in cars with under 18s present | 2016-2017: Introduction of standard packaging | 2016-2017: Introduction of minimum pack size (2016/17)
Thus, in addition to anchoring the monetary regime, stabilization requires eliminating the budget deficit through fiscal reform in which explicit taxes are substituted for the inflation tax and expenditures are brought into line with expected revenue.
Describing the MPC as a truly revolutionary step, he said we got used to decades of moderate to high inflation, leading to industrialists and governments paying negative real interest rates and the burden of the hidden inflation tax falling on the middle class saver and the poor.
The Inflation Tax in a Real Business Cycle Model", American Economic Review, 79, 733-48.
In addition, it highlights the role of tax evasion and inflation tax on inequality in the country.
6m pensioners will not receive their above inflation tax this year
It was a similar and, for some, complex argument the Labour leader made last year when, during his final opposition budget speech, he complained that the former Tory-Lib Dem administration had sold the city short with a string of below inflation tax increases during its eight-year run in office - leaving the city's income suppressed and less able to weather the storm of austerity cuts from central government.
Abstract This essay argues that Milton Friedman's initial exposition of the inflation tax on money was flawed.
The crisis is being blamed on above inflation tax rises and cheap supermarket sales.
Moreover, reliance on seigniorage (4) is quite high in Pakistan due to low tax collections/base, thus inflation targeting gives less opportunity to use inflation tax for revenue collection, which directly effects the revenue collection from seignorage.