What would be the effect of indexing the tax system to take into account the effects of inflation on taxing capital gains?

Question

Quizplus · Accepted Answer

Indexing the tax system to take into account the effects of inflation on taxing capital gains would mean that only the real interest earnings (i.e., the earnings adjusted for inflation) would be taxed. This would make the tax system more fair and would ensure that investors are not penalized for simply keeping pace with inflation. It would also incentivize investment and encourage economic growth. Therefore, choice A is the correct answer.

What Would Be the Effect of Indexing the Tax System