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Category: Research Paper

Subcategory: Economics

Level: High School

Pages: 3

Words: 825

Inflation tax Ethical or Economic question?
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Inflation tax Ethical or Economic question?
Despite the regressive consumption of non-linear tax due to inflation, it also leads to a countries loss of purchasing power. Most people without the knowledge of money, economy dynamics and exchange rates argue that when the government prints more money to cater for its increased demand instead of raising the taxes or borrowing is advantageous. Being aware that the practice causes an erosion of the value of funding – inflation tax – that is a burden to cash holders. Both rich and the poor are effect by such inflation. The question of who takes the lion’s share of the responsibility arise. As my friend argues, most people think the poor stand to lose when such taxes result, which is not the case, the rich stand to gain from it.
Tax due to inflation is more of a wealth transfer than a tax. Some of the investments stand to gain while other money users dig deeper to cater for the increase. Holders of some of the equities, hard assets and the debtors stand to gain from the increase. The owner of the above is the rich who can afford to be debtors and own hard assets. The wealth is unlikely to rely on fixed income, as they are not employees. The group of people who suffer most is the employed – those who rely on a fixed rate of revenue – and the poor who despite of inflated prices the sources of income remain constant (Erosa & Ventura 2002)…

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