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Excise and Sales Taxes as Anti-Inflationary Measures
John F. Due
The Annals of the American Academy of Political and Social Science
Vol. 326, Inflation (Nov., 1959), pp. 79-84
Published by: Sage Publications, Inc. in association with the American Academy of Political and Social Science
Stable URL: http://www.jstor.org/stable/1033353
Page Count: 6
You can always find the topics here!Topics: Taxes, Sales taxes, Commodities, Income taxes, Excise taxes, Tax incentives, Economic inflation, Commodity prices, Price increases, Taxation
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Sales and excise taxes are in all likelihood typically shifted forward in the form of higher commodity prices. Their anti-inflationary influence arises from their effect in reducing real purchasing power by raising commodity prices relative to factor incomes. Unlike other price increases, this type does not have a spiraling effect because it does not generate additional income. Sales and excises have some relative advantage over income taxes so far as inflation control is concerned. They place a heavier relative burden on persons spending high percentages of their incomes and compel them to reduce consumption. They give some incentive to spend less and save more. In addition some persons may tend to spend the same dollar sum, including tax elements, as before. If persons attempt to maintain their old consumption levels of goods and services, they increase their tax liability by so doing. On the other hand, much of the greater anti-inflationary advantage of the sales and excise taxes will be lost if they generate wage increases. The sales and excise taxes may also offer some limited advantage from the standpoint of production incentives, but this can easily be exaggerated. The principal objections to the sales and excise taxes are equity ones; the levies conform much less closely with accepted standards of equity in taxation than the income tax. Sales and excise taxes, as well as the income tax, are greatly inferior to the expenditure tax as anti-inflationary measures, and the latter is more equitable than the commodity taxes.
The Annals of the American Academy of Political and Social Science © 1959 American Academy of Political and Social Science