4 ms·

Inflation is a tax on wealth, not on labor.

dragonwriter 7y ago
It's a tax on wealth, but as the Krugman article points out it also allows real wage cuts without the psychological barrier facing nominal wage cuts, which facilitates corrections when wages have overshot their sustainable levels, assisting in reaching full employment (unsustainably high wages necessarily reduce employment levels.) This is related to why minimum wage is inferior to UBI as a basic support: minimum wage is in tension with employment, especially at the low end, in a fairly direct way. UBI, while it had to be supported somehow, isn't directly in tension with employment specifically at the bottom. I'd like to see minimum wage tied to inflation but UBI tied to a funding stream that grows with output, so that per capita benefits grow (over the long term) with per capita output. And I'd like to see minimum wage decreased from the level it is calculated at with inflation adjustments by the hourly wage equivalent of UBI (for simplicity, annual UBI/2000, so that a $12,000 annual UBI would reduce minimum wage by $6/hr from it's pre-UBI level.)
kaibee 7y ago
The prices of real things change in response to inflation. Inflation is only a tax on cash wealth.
- dnautics 7y ago
  And which social class has relatively more of their wealth tied up in cash versus investments?
bernawil 7y ago
I don't get it. Asset prices track inflation like clockwork. What's even funnier to me is that taxes on wealth rarely raise as fast as asset prices! If anything it's a tax on income.
- lonelappde 7y ago
  Wealth is accumulated income which is subject to income tax so wealth a different dimension, so even if you expect an additional tax that grows at the same rate? The units are incoherent.
  - bernawil 7y ago
    Wealth is accumulated income tax That's only valid if you think "wealth" can only be a bunch of cash in a bank account you saved. You may own a piece of land that could even predate the government in some places. Or you may own a patent. That's "wealth" which is subject to different taxes to "income". so even if you expect an additional tax that grows at the same rate? I don't expect, anything I was just pointing a fact. I live in a country that has experienced inflation over the last ten years and the reality is that income taxes have followed inflation but property taxes not, because the government doesn't update property book values as often. The result is that you can hold very expensive property while paying very low taxes. But this also happens in lots of other places: California and Proposition 13 come to mind.

It's a tax on wealth, but as the Krugman article points out it also allows real wage cuts without the psychological barrier facing nominal wage cuts, which facilitates corrections when wages have overshot their sustainable levels, assisting in reaching full employment (unsustainably high wages necessarily reduce employment levels.) This is related to why minimum wage is inferior to UBI as a basic support: minimum wage is in tension with employment, especially at the low end, in a fairly direct way. UBI, while it had to be supported somehow, isn't directly in tension with employment specifically at the bottom. I'd like to see minimum wage tied to inflation but UBI tied to a funding stream that grows with output, so that per capita benefits grow (over the long term) with per capita output. And I'd like to see minimum wage decreased from the level it is calculated at with inflation adjustments by the hourly wage equivalent of UBI (for simplicity, annual UBI/2000, so that a $12,000 annual UBI would reduce minimum wage by $6/hr from it's pre-UBI level.)

kaibee 7y ago

The prices of real things change in response to inflation. Inflation is only a tax on cash wealth.

dnautics 7y ago
And which social class has relatively more of their wealth tied up in cash versus investments?

bernawil 7y ago

I don't get it. Asset prices track inflation like clockwork. What's even funnier to me is that taxes on wealth rarely raise as fast as asset prices! If anything it's a tax on income.

lonelappde 7y ago
Wealth is accumulated income which is subject to income tax so wealth a different dimension, so even if you expect an additional tax that grows at the same rate? The units are incoherent.
- bernawil 7y ago
  Wealth is accumulated income tax That's only valid if you think "wealth" can only be a bunch of cash in a bank account you saved. You may own a piece of land that could even predate the government in some places. Or you may own a patent. That's "wealth" which is subject to different taxes to "income". so even if you expect an additional tax that grows at the same rate? I don't expect, anything I was just pointing a fact. I live in a country that has experienced inflation over the last ten years and the reality is that income taxes have followed inflation but property taxes not, because the government doesn't update property book values as often. The result is that you can hold very expensive property while paying very low taxes. But this also happens in lots of other places: California and Proposition 13 come to mind.