The inflation tax refers to the reduction in the value of cash due to inflation, meaning that the purchasing power of money decreases over time. As a result, people are effectively paying a tax on the decrease in the real value of their money.

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The Inflation Tax Is

Question 4

Multiple Choice

The inflation tax is

A) an additional income tax levied during periods of inflation to prevent government revenue from losing value
B) the movement of taxpayers into higher tax brackets due to inflation
C) the reduction in the value of cash due to inflation
D) the federal sales tax on goods whose prices rise by more than the general inflation rate
E) a tax on trucking, so called because of the inflation of the tires

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