Inflation tax - Factbites

Inflation tax - Factbites
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Topic: Inflation tax

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	Inflation - Wikipedia, the free encyclopedia
		Since inflation is often the result of government policies to increase the money supply, the government contribution to an inflationary environment is a tax on holding currency.
		Inflation, from this perspective, is seen as the market expression of what the time value of money is. That is, if a dollar today is worth more to someone than a dollar a year from now, then there should be a discount in the economy as a whole for dollars in the future.
		Inflation measurements sometimes exclude volatile goods from the basket to be able to gauge the "core" rate of inflation.
	en.wikipedia.org /wiki/Inflation (5546 words)

	Kravchuk: Seigniorage and the Inflation Tax
		Given the decline in the inflation tax yield as a percent of GDP after 1994, we are compelled to examine whether Ukraine's appetite for inflation exceeded the maximum potential yield from the inflation tax.
		The point at which inflation tax revenues turn downwards depends upon the semi-elasticity of real balances to changes in inflation.[7] On the basis of a limited number of quarterly observations, Havrylyshyn, et.
		It is clear that the inflation tax yield peaked in 1992-93, falling steadily throughout 1993 and into 1994.
	www.huri.harvard.edu /workpaper/kravchuk/seignoir.html (1094 words)

	FRBSF: Economic Letter - What is the Optimal Rate of Inflation? (9/19/97)
		Phelps argued that at low rates of inflation, distortions associated with the inflation tax might be minor and that substituting other taxes for the inflation tax might result in greater deadweight losses.
		Phelps pointed out that inflation is a source of tax revenue for the government and that if inflation were reduced other taxes would have to be increased in order to replace the lost revenue.
		The difference between the losses of those who pay the tax and the revenue raised is known as the "deadweight loss" or "excess burden" of the tax, and one principle of public finance is that taxes should be administered in a way that minimizes these losses.
	www.sf.frb.org /econrsrch/wklyltr/el97-27.html (1943 words)

	Move to expand child tax credits hits snag - Boston.com
		Tax laws set a minimum income for eligibility, but that threshold is adjusted for inflation.
		Citizens for Tax Justice, a private advocacy group, said Mississippi and Louisiana have the largest proportion of families who could see their child tax credits shrink as the minimum-income threshold grows with inflation.
		An effort to keep inflation from eating away at poor families' child tax credits has run into obstacles, even though supporters had hoped poverty revealed by Hurricane Katrina might give new urgency to fixing the problem.
	www.boston.com /news/nation/washington/articles/2005/11/07/move_to_expand_child_tax_credits_hits_snag (477 words)

	Inflation Tax
		Deficit financing and inflation are other ways to hide taxes.
		However, the tax laws can and often do ignore the effects of changing real values, and the owner of the account may find that he pays taxes, even though in real terms (that is, in terms of purchasing power) he has no income at all.
		When inflation is taken into account, there should be a negative entry of $566 because the purchasing power of the original $10,000 has shrunk to $9434 in the second year.
	ingrimayne.saintjoe.edu /econ/optional/HideTaxes.html (777 words)

	NCPA - Tax Issues - Inflation's Effect On Capital Gains
		Even a small increase in inflation would affect investors with capital gains on their portfolios, and they would lose even if Congress and the White House were to agree to reduce capital gains tax rates from 20 percent to 15 percent.
		Inflation is at a near-historic low, but there is no guarantee it will not return, economists warn.
		And in the event of another bout of inflation, economic growth would not be further hobbled by the disincentive to invest.
	www.ncpa.org /pi/taxes/pd072999f.html (388 words)

	Washington Policy Center • Publications
		And because annual tax increases are cumulative -- each year’s percentage increase is applied to the higher base of the previous year -- residents in counties that have consistently limited property tax increases to inflation since 1997 are receiving significantly greater benefit than their neighbors who live in consistently high-tax counties.
		When imposing higher-than-inflation tax increases local officials must now explain their reasons, thus allowing their constituents to be informed of the changes in tax policy that effect their lives and to hold their representatives accountable for these decisions.
		Unused taxing authority may be carried forward from year to year.[4] Referendum 47 established a lower benchmark for the annual tax increase: inflation as measured by the implicit price deflator (IPD).
	www.washingtonpolicy.org /TaxLimitation/PBGuppyTaxLimitR47Effectiveness.html (7752 words)

	Brookings Institution Press, The Labyrinth of Capital Gains Tax Policy, A Guide for the Perplexed
		As explained earlier, the inflation tax on bonds and other kinds of income-producing assets is greater than it is on capital gains assets, because tax cannot be deferred on non-capital gains assets.
		Taxing inflationary gains might be unclesirable, but it is not unfair ex ante because investors know about it before they make their investment decisions.
		Tax equity and simplicity mean the same thing for capital gains as they do for other forms of income: treat people in similar circum- stances the same way, tax those with more ability to pay more heav- ily than those with lesser ability, and make the tax system relatively easy to comply with and administer.
	brookings.nap.edu /books/0815712707/html/119.html (2716 words)

	Inflation, by David Ranson: The Concise Encyclopedia of Economics: Library of Economics and Liberty
		Economists who view inflation as a very serious problem point to what they call the "inflation tax." By this they mean the reduction in the purchasing power of the cash balances held by the private sector—like a wealth tax.
		Inflation is the loss in purchasing power of a currency unit such as the dollar, usually expressed as a general rise in the prices of goods and services.
		Inflation has tended to increase in periods of slow growth or recession and decrease in periods of expansion.
	www.econlib.org /library/Enc/Inflation.html (2305 words)

	USATODAY.com - Bush considers factoring inflation for tax break
		Inflation indexing would work this way: Currently, if an investor bought stocks worth $10,000 in 1992 and sold them today for $20,000, a 20% capital gains tax — the top rate paid by most investors — would be applied to the $10,000 profit, resulting in a tax bill of $2,000.
		If Bush decides against indexing capital gains for inflation, aides say, he will ask Congress to lower the maximum capital gains tax rate, which was cut from 28% to 20% in 1997.
		But using the Consumer Price Index to adjust for inflation over the past 10 years, the taxable amount would be $7,790, for a tax bill of $1,558.
	www.usatoday.com /news/washington/executive/2002-08-21-bush-tax-break_x.htm (665 words)

	Hyperinflation, by Michael K. Salemi: The Concise Encyclopedia of Economics: Library of Economics and Liberty
		In effect, inflation is a form of taxation where the government gains at the expense of those who hold money whose value is declining.
		They attempt to avoid the inflation tax by holding more of their wealth in the form of physical commodities.
		Faced with a shortage of funds, it chose to raise revenue through the inflation tax instead of raising income taxes or reducing other government spending.
	www.econlib.org /library/Enc/Hyperinflation.html (1486 words)

	Growth versus income: comparing "apples and oranges." (Personal Financial Planning)
		An inflation index factor is computed for each year by multiplying the previous year's index by 1 minus the assumed rate of inflation.
		I made calculations for four types of investments: fully taxable in the year income is received, fully tax exempt in the year received, tax deferred on the income until the end of the period, and investments held in a qualified retirement plan.
		The tax rate would not be at capital gain rates, but at the ordinary income rates in effect at the time the account was paid.
	www.nysscpa.org /cpajournal/old/16458950.htm (2012 words)

	Hidden Taxes
		The inflation tax-collected in the form of a continually depreciating currency-has been especially egregious in the postwar period.
		The Clinton inflation tax alone (1992 to the present) has sliced off 18 cents from the value of the dollar.
		It is a tax paid by working Americans whom the government attempts to placate by promising subsidies later in life.
	www.mises.org /freemarket_detail.asp?control=299&sortorder=articledate (880 words)

	Inflation-Adjusted Tax Items for Tax Year 2003
		By factoring inflation into the tax rates and certain other amounts, the law protects taxpayers from losing the value of various benefits.
		The 10% tax bracket expands to the first $7,000 of taxable income for single persons and married persons filing separately, to the first $14,000 for married persons filing jointly and surviving spouses.
		The 15% tax bracket for married persons filing jointly and surviving spouses expands to $56,800 of taxable income.
	www.irs.gov /newsroom/article/0,,id=108862,00.html (184 words)

	Chapter 22
		Thus the government uses the inflation tax, instead of taxes on income, to finance its spending.
		inflation tax: the revenue the government raises by creating money.
		Students will also find that there are numerous costs to the economy from high inflation, but that there is not a consensus on the importance of these costs when inflation is moderate.
	www.seattlecentral.org /faculty/jhubert/manch22.html (4496 words)

	Eastern Economic Journal: perception of government bonds and money as net wealth: An integrated approach, The
		By "objective," we mean the matter-of-fact calculations of the prospective additional taxes to pay the interest on bonds, and of the inflation tax on money holdings, where the private sector fully recognizes such tax implications.
		Since all holders of money assets face the identical proportional inflation tax, they are all likely to be equally aware of the tax burden.
		In sharp contrast, the incidence of the bondinduced tax liability is not directly linked to the amount of bonds held, but falls on the taxpaying public, in general.
	www.findarticles.com /p/articles/mi_qa3620/is_199810/ai_n8816519 (1173 words)

	Russia's struggle with stabilization
		With the continuing shrinkage of the inflation tax base, Russia requires a rising level of inflation just to collect the same underlying level of real inflation taxation.
		Tax collections continue to shrink in 1994, both because of tax evasion and because of increased resistance, formal and informal, to tax payments by the regions.
		By August, inflation rates had declined to 9% a month, which proved to be the low point during 1992 and 1993.
	www.worldbank.org /html/dec/Publications/Briefs/DB39.html (1032 words)

	Victory.html
		Seventy-eight percent of the taxes to be raised by the House bill was practically no effect on the prevention of inflation.
		The principle anti-inflation provision was that of excise taxes.
		The tax dollars collected from taxpayers of these lower-income groups are dollars that would otherwise be spent for food, shelter, and the bare necessities of life.
	www.taxhistory.com /Victory.html (702 words)

	Here Comes Inflation, The Cruelest Tax Of All
		During the last 10 years, a period when inflation has been "tamed" or "under control" or "negligible," the cost of what you could have bought for $100 in 1993 has risen to $130.10.
		As of the end of March, inflation was running at almost 4 percent per year.
		As inflation increases, the government increases the nominal value of the bond.
	www.rense.com /general53/cruel.htm (1411 words)

	The Optimal Inflation Tax
		We derive and compare the optimal inflation tax solutions across the different environments and find that Friedman's policy recommendation of a zero nominal interest rate is the right one.
		We determine the second best rule for the inflation tax in monetary general equilibrium models where money is dominated in rate of return.
		"The optimal inflation tax," Discussion Paper / Institute for Empirical Macroeconomics 123, Federal Reserve Bank of Minneapolis.
	ideas.repec.org /a/red/issued/v2y1999i2p325-346.html (772 words)

	Chap05.ppt
		Roldós (1995): Due to cash-in-advance constraint, inflation creates a wedge between the real rate of return on foreign-currency-denominated assets and domestic-currency-denominated assets.
		Increase is satisfied automatically through the balance of payments, as agents repatriate their capital held abroad and convert it costlessly into domestic currency.
		Over time, the increase in output of tradable goods lowers the initial current account deficit.
	www1.worldbank.org /wbiep/macro-program/agenor/PowerPoint/EAG_book/Chap05.ppt (687 words)

	EconPapers: THE INFLATION TAX IN A REAL BUSINESS CYCLE MODEL
		Working Paper: The Inflation Tax in a Real Business Cycle Model (1987)
		Journal Article: The Inflation Tax in a Real Business Cycle Model (1989)
		Keywords: business cycles; inflation; money; economic models; employment (search for similar items in EconPapers)
	econpapers.repec.org /paper/rocrocher/155.htm (196 words)

	HeraldNet: Tax bracket forecasts show more relief is coming
		Under the projected new brackets, a married couple filing jointly and reporting total taxable income of $100,000 next year would pay $145 less in federal income taxes for 2004 solely because of inflation-indexing, says George Jones, senior federal tax analyst at CCH Inc., a provider of tax information and software.
		But three private-sector tax specialists have forecast what the new brackets will be, based on a key inflation report released last week.
		Each year, the government adjusts tax brackets to account for inflation.
	www.heraldnet.com /Stories/03/9/28/17502344.cfm (486 words)

	Inflation, by David Ranson: The Concise Encyclopedia of Economics: Library of Economics and Liberty
		Economic losses associated with the inflation tax and other distortions are known as the "welfare cost of inflation." At one extreme of the debate, Harvard economist Martin Feldstein has claimed that the present value of the losses that result from unending inflation may be infinite!
		Economists who view inflation as a very serious problem point to what they call the "inflation tax." By this they mean the reduction in the purchasing power of the cash balances held by the private sector—like a wealth tax.
		Inflation is the loss in purchasing power of a currency unit such as the dollar, usually expressed as a general rise in the prices of goods and services.
	www.econlib.org /library/Enc/Inflation.html (2305 words)

	Virtual Economy Glossary (D-F)
		If tax allowances are not increased in line with inflation, and people's incomes increase with inflation then they will be moved up into higher tax bands and so their tax bill will go up.
		This type of inflation is called demand-pull inflation and is argued by Keynesians to be one of the main causes of inflation.
		Deflationary fiscal policy is using the level of government expenditure and taxation to reduce the level of aggregate demand in the economy.
	www.bized.ac.uk /virtual/economy/library/glossary/glossarydf.htm (1451 words)

	Inflation, by David Ranson: The Concise Encyclopedia of Economics: Library of Economics and Liberty
		Economists who view inflation as a very serious problem point to what they call the "inflation tax." By this they mean the reduction in the purchasing power of the cash balances held by the private sector—like a wealth tax.
		Inflation is the loss in purchasing power of a currency unit such as the dollar, usually expressed as a general rise in the prices of goods and services.
		In modern times inflation continues to be blamed on private greed, and governments still seek to restrain it by decree, sometimes even devaluing their currencies as they do so.
	www.econlib.org /library/Enc/Inflation.html (2305 words)

	Wealth Tax
		Inflation increases the burden of taxes in the case of the income tax.
		Absent inflation, the income tax was 1.60 for an asset that was worth 104 at year-end.
		To the extent an income tax may have a greater need to be significantly progressive, certainly compared to a comprehensive wealth tax, the possibility of that asymmetry is greater for an income tax than for a wealth tax.
	www.law.upenn.edu /fac/dshakow/wealthTaxation.html (4191 words)

	The recession of 1982 was Carter’s fault
		Double-digit inflation was well on its way to being defeated by this time, and Reagan's tax cuts and deregulation policies were already in effect.
		Many conservatives argue that impending changes in tax rates affect corporate behavior; for example, when the rich learned in 1986 that capital gains would be raised in 1987, they took all the appropriate counter-measures in 1986.
		There was a brief and unintentional recovery in 1981, so, with inflation still high, he tightened the money supply yet again, resulting in the unusually severe 1982 recession.
	www.huppi.com /kangaroo/L-recession1982.htm (624 words)

	Lowey (NY18)- Press Release - Reps. Lowey, Israel Announce Effort To Fix "Stealth Tax"
		The AMT is a provision of the tax code originally meant to apply only to the exceptionally wealthy, but since it was never indexed for inflation it is suddenly gouging the unsuspecting and unprepared middle class.
		Reps. Lowey and Israel are proposing legislation to change the tax code by increasing the AMT exemption to $100,000 and indexing it for inflation.
		The Alternative Minimum Tax (AMT) was instituted in 1969 in an effort to ensure that wealthy taxpayers could not manipulate the tax code to avoid paying taxes entirely.
	www.house.gov /apps/list/press/ny18_lowey/amt040405.html (417 words)

	Inflation-Adjusted Tax Items for Tax Year 2003
		By factoring inflation into the tax rates and certain other amounts, the law protects taxpayers from losing the value of various benefits.
		After these documents were issued, the Jobs and Growth Tax Relief Reconciliation Act of 2003 made changes to these inflation-adjusted items:
		The 10% tax bracket expands to the first $7,000 of taxable income for single persons and married persons filing separately, to the first $14,000 for married persons filing jointly and surviving spouses.
	www.irs.gov /newsroom/article/0,,id=108862,00.html (417 words)

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