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 ?
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.
The crisis is being blamed on above inflation tax rises and cheap supermarket sales.
Beginning with Bailey (1956), the welfare cost of inflationary finance is treated as the deadweight loss of inflation tax, which is calculated by integrating the area under the money demand curve (Harberger Triangle).
Today, one motivation for advocating the inflation tax is that it is a way to impose taxation on the very large share of the population that is exempt from the income tax, while at the same time asserting that a political pledge of "no tax increases for low-income people" has been kept.
David Hume (1970), while exclusively focusing on the units-change aspect of money stock inflation in his quantity theory, saw no widening wealth gap, as the inflation tax would deplete everybody's money in the same way.
Continual, above - inflation tax increases have led to the UK having one of the highest tobacco excise rates in the world," he said.
After years of above inflation tax increases, it has been easy for the government to fund over the top wage increases and generous pensions.
Once all outstanding bonds have been redeemed and reissued with a higher coupon, there is no further inflation tax revenue from this source (although there will be some on non-interest bearing holdings of cash).
As mentioned, we show in the Appendix that the maximum sustainable level of debt is the present discounted (by interest rates corrected for nominal GDP growth) value of all future primary surpluses and inflation tax revenue.
Thereafter, he acknowledged that monetization "simply amounts to replacing other forms of taxes with an inflation tax.