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 ?
I mean there is not much effort to break the bubble of speculation and asymmetric inflation not to mention the high cost of corruption and even inflation tax. Should the government and the central bank not work on these accounts, without which anyways inflation will not be dented much with the tool of policy rate given the reasons indicated above.
During FY 2013-14 to FY 2016-17, the government of Pakistan excessively increased federal excise duty by 87 percent through above inflation tax increases.
Specifically, lower inflation implies a lower inflation tax on the household's currency holdings.
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. (1)
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.
One argument that it might be ineffective stems from the specter of a future "inflation tax." In an economy at full employment and full potential output, a money-financed stimulus could produce only faster price growth, because no increase in real output would be possible.
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.
More than 1.6m 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.