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Abolish The Inflation Tax On The Poor And Middle Class, John Plecnik

Law Faculty Articles and Essays

Inflation erodes the purchasing power of money and distorts some income tax liabilities upward, which in turn discourages savings and investment. When inflation is caused by the central bank “printing” money to fund deficit spending, it results in a transfer of real wealth from the holders of dollars or assets denominated in dollars to the government and, in normative terms, may be conceptualized as a tax. The effect of the so-called inflation tax is regressive, because low-income taxpayers often lack the sophistication or liquidity to invest in hedges against inflation. Following the double-digit inflation of the late 1970s and early …