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Politics : Foreign Affairs Discussion Group

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To: c.hinton who wrote (262303)	4/22/2008 5:32:05 PM
From: TimF	Read Replies (1) of 281500

Inflation may be a stealth "quasi-tax". It really isn't directly a tax. It does create "bracket creep", but that is effectively an increase in the rate of the actual taxes. It also inflates away the value of government debt, but that risk is assumed in buying the government debt, and the government pays extra interest in order to get debt holders to take the risk. There is also the income from seigniorage that increases with inflation, but except in hyper-inflationary conditions it tends to be a very small part of government revenue. Beyond its role in creating revenue for the government, inflation imposes costs on holders of cash and cash equivalents, and creditors. But not every imposed cost is a tax, or even really a qausi-tax. A tax is something that gives income to the government (well I suppose if it can't be collected it would still be a (failed) tax, but its at least an attempt to provide revenue for the government). None of which should be taken to imply that I think that inflation is not an actual problem.

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