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July 1975

Paying More Taxes and Affording It Less

by Nancy Jianakoplos

One of the many side effects of inflation is that it results in a transfer of resource command from the private sector to the public sector of the economy. The Government’s status as a net monetary debtor and the progressive income tax structure are the vehicles by which this resource transfer occurs. This article discusses how inflation and the progressive tax structure interact to generate Government revenue and reduce the take-home pay of taxpayers.