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The definition of a progressive tax is that as one's income goes up, the percentage of one's income that one pays in that tax goes up. This tax isn't perfectly

The definition of a progressive tax is that as one's income goes up, the percentage of one's income that one pays in that tax goes up. This tax isn't perfectly progressive because it depends on people's exact behavior and by investing rather than just having it in a savings account, the rich can sort of have their wealth increase in value with inflation, but it is the case that extremely poor people with no savings barely feel it, while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value.

anamax 17y ago
> but it is the case that extremely poor people with no savings barely feel [inflation], while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value. Poor people's wages don't necessarily increase as fast as the cost of things that they buy. If their wages fall behind, they lose. BTW - "rich people" don't keep an appreciable fraction of their money in checking and savings. They keep their "cash equivalents" in things that have higher yields during times of inflation. (I think that TPS bond funds already exist, providing both liquidity and the inflation-protection of TPS bonds.) Money market interest rates were fairly high during the last time of significant US inflation.
teilo 17y ago
Yes, you are correct on your definition. But arguing that the rich get taxed at a higher percentage by inflation than do the poor is silly. If the poor have no savings at all, then you are correct in they have nothing to lose but incorrect in that this equates to a progressive tax. That's like saying that a man with no money has a lower tax rate. He has no taxes at all. By your definition ALL taxes are progressive, but of course that's not true. Many poor people do save, and inflation causes what they save to lose value at exactly the same rate as the money saved by the rich. If anything, by your definition, inflation is a regressive tax, meaning that the poor are taxed more than the rich. The rich tend to be good at profiting from inflation, as you noted.

anamax 17y ago

> but it is the case that extremely poor people with no savings barely feel [inflation], while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value. Poor people's wages don't necessarily increase as fast as the cost of things that they buy. If their wages fall behind, they lose. BTW - "rich people" don't keep an appreciable fraction of their money in checking and savings. They keep their "cash equivalents" in things that have higher yields during times of inflation. (I think that TPS bond funds already exist, providing both liquidity and the inflation-protection of TPS bonds.) Money market interest rates were fairly high during the last time of significant US inflation.

teilo 17y ago

Yes, you are correct on your definition. But arguing that the rich get taxed at a higher percentage by inflation than do the poor is silly. If the poor have no savings at all, then you are correct in they have nothing to lose but incorrect in that this equates to a progressive tax. That's like saying that a man with no money has a lower tax rate. He has no taxes at all. By your definition ALL taxes are progressive, but of course that's not true. Many poor people do save, and inflation causes what they save to lose value at exactly the same rate as the money saved by the rich. If anything, by your definition, inflation is a regressive tax, meaning that the poor are taxed more than the rich. The rich tend to be good at profiting from inflation, as you noted.