The U.S. in 1981--83 went from a high-inflation, high-tax economic basket case to a much stronger competitor, able once again to attract capital from locals and foreigners.
Rampant inflation--tax brackets weren't indexed in those days--was slamming workers with massive unlegislated tax hikes by pushing them into higher tax brackets.
The International Monetary Fund deserves its share of discredit for pushing antigrowth, pro-inflation, pro-big-tax prescriptions on Argentina.
Tax compliance increased and the inflation-adjusted revenues from the personal income tax rose more than 20 percent annually during the three years following the adoption of the flat-rate tax.
FORBES: The Wealth Of The States Vs. 'New Normal' Stagnation
Key to mitigating the damage of the about-to-worsen inflation is making permanent the tax cuts of 2003--or at least extending them for a couple of years.
These adjustments prevent inflation-induced increases in tax rates, an effect called bracket creep.
The group has argued that that corporate taxes, payroll taxes and so-called "bracket creep"--where taxpayers are bumped into a higher tax bracket because of inflation--are all examples of hidden taxes.
Chancellor George Osborne described CPI as a "more appropriate" measure of inflation - for state benefits and tax credits as well as public sector pensions - which would save the government money by producing smaller increases each year.
For instance, if interest rates are 10%, tax relief is 30% and inflation is 7%, the real after-tax interest rate is 0%.
George Osborne has been looking at securing the headlines this year by scrapping a much hated tax: the so-called "beer tax" - the automatic 2% increase above inflation in alcohol duty - which both the Sun and the Sunday People have campaigned to see the back of.
One can only hope that he owns some tax-exempt inflation-indexed bonds, just in case.
FORBES: Buffett's Billions Can't Buy Him Exemption From His Tax-Averse Past
Baby-boomers getting their first foot on the housing ladder enjoyed both mortgage-tax relief and the debt-gobbling effects of inflation.
You can see that in this issue, where we tell of the struggle to preserve capital against the ravages of inflation, tax collectors and in-laws.
In the middle panel David Armstrong describes a low-risk strategy: tax-exempt bonds that, like Treasury Inflation-Protected Securities, give you a return over and above inflation.
Legislation to increase the country's rate of consumption tax, enacted last August, states that the government must try to achieve nominal economic growth of about 3 per cent and real growth of about 2 per cent -- implying inflation of about 1 per cent -- before going ahead with the tax hikes.
His rival, Vice President Al Gore, also focused on education, pledging to expand a tax-free, inflation-indexed savings plans enabling parents to set aside money for their childrens' college education.
Remember that inflation is the sneakiest of all tax hikes--it destroys capital gains.
After-tax income, net of inflation, has barely been growing over the past five years and is likely to decline this year.
We are now willing to buy safe bonds that pay above our expected rate of inflation (after tax) out to 7-10 year maturities rather than the 3-5 year target we have maintained for the past two years.
The Conservatives have accused the government of "spin", arguing a 4% increase in council tax would compound previous above-inflation rises.
Income streams from real enterprises were nil anyway in the context of negligible economic growth and a tax code un-indexed for inflation.
It doesn't work for tax-paying individuals, but take Treasury inflation-protection bonds.
The Bank's favourite measure of inflation, which excludes both mortgage-interest costs and indirect-tax changes, was unchanged in July, at an annual rate of 2.2% (see chart).
The Hall-Sargent calculations show that almost all of this inflation tax was borne by those who held bonds with a maturity of five years or more. (That is because investors in short-term bonds could more quickly demand higher interest rates to compensate for inflation.) The trick is harder to repeat today.
But the Federal Reserve's bringing inflation down to a near-nonexistent level was the equivalent of a tax cut, overwhelming the damage done by those tax increases.
The lack of inflation indexing is one argument for a lower rate of tax on long-term capital gains, but it is not entirely satisfactory.
Kudlow has long recognized what makes progress and prosperity possible: tax cuts, sound money -- low or no inflation, free trade, deregulation and spending restraints.
Kudlow has long recognized what makes progress and prosperity possible: tax cuts, sound money -- low or no inflation, free trade, deregulation and spending re-straints.
In America, too, real post-tax interest rates are not historically low, in part because mortgage-interest tax relief is worth less at lower rates of inflation.
The result was a 1.4% drop in food costs making it the largest in four years as inflation-struck shoppers conserved lower disposable incomes impacted by a rising government sales tax.
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