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What does inflation accomplish that a wealth tax of 2% doesn't accomplish. Such a wealth tax would be more honest and transparent (ie. politicians would have to

What does inflation accomplish that a wealth tax of 2% doesn't accomplish. Such a wealth tax would be more honest and transparent (ie. politicians would have to justify it, they couldn't just outsource the PR hit to an unelected central bank), and could additionally be more nuanced (eg. marginal tax rates). Inflation mostly hits the relatively poor, because they are the only ones holding a large proportion of their wealth as cash.

WJW 4y ago
Inflation is much easier to sell from a PR perspective. New taxes typically lead to lots of protests and are politically difficult, while inflation has no such problems. In addition inflation benefits entities with lots of debt, such as homeowners and governments. Since homeowners are often a significant voter block in most democracies and governments are, well, governments, it is easy to see why appeasing both those groups would be appealing to politicians.
- _Algernon_ 4y ago
  To your second point: I'm not convinced that that is true. If inflation is predictably 2%/year, you'd expect that to be priced into the interest rate on loans. A bank selling a loan would pass the inflation cost to the borrower by increasing the interest rate appropriately.
sokoloff 4y ago
A wealth tax hits assets and currency equally. Inflation hits primarily currency while supporting assets (or leaving them relatively untouched). Further, the administrative effort of any wealth tax is enormous (if you're trying to reach the equivalent effect of taking 2% of the purchasing power away from the money that's literally in my jeans pocket) and subject to substantial judgment (what is my family pizza place really worth?). Inflation has no judgment required and no per-person book-keeping, reporting, nor auditing effort required.
88913527 4y ago
Inflation rates experienced by individuals vary based off types of goods/services purchased. A wealth tax would instead apply evenly.
HDThoreaun 4y ago
Inflation devalues cash, not wealth. Positive inflation encourages people to use their cash to invest which the government wants because it increases economic activity.
lamontcg 4y ago
Inflation causes interest rates to rise which increases the cost of borrowing. Arguably we should be running closer to 5% inflation which corresponding increases in interest rates, which would put a damper on our asset bubble economy.

WJW 4y ago

Inflation is much easier to sell from a PR perspective. New taxes typically lead to lots of protests and are politically difficult, while inflation has no such problems. In addition inflation benefits entities with lots of debt, such as homeowners and governments. Since homeowners are often a significant voter block in most democracies and governments are, well, governments, it is easy to see why appeasing both those groups would be appealing to politicians.

_Algernon_ 4y ago
To your second point: I'm not convinced that that is true. If inflation is predictably 2%/year, you'd expect that to be priced into the interest rate on loans. A bank selling a loan would pass the inflation cost to the borrower by increasing the interest rate appropriately.

sokoloff 4y ago

A wealth tax hits assets and currency equally. Inflation hits primarily currency while supporting assets (or leaving them relatively untouched). Further, the administrative effort of any wealth tax is enormous (if you're trying to reach the equivalent effect of taking 2% of the purchasing power away from the money that's literally in my jeans pocket) and subject to substantial judgment (what is my family pizza place really worth?). Inflation has no judgment required and no per-person book-keeping, reporting, nor auditing effort required.

88913527 4y ago

Inflation rates experienced by individuals vary based off types of goods/services purchased. A wealth tax would instead apply evenly.

HDThoreaun 4y ago

Inflation devalues cash, not wealth. Positive inflation encourages people to use their cash to invest which the government wants because it increases economic activity.

lamontcg 4y ago

Inflation causes interest rates to rise which increases the cost of borrowing. Arguably we should be running closer to 5% inflation which corresponding increases in interest rates, which would put a damper on our asset bubble economy.