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The Effect of Inflation on the Income Elasticity of Taxes

Author

Listed:
  • Jack P. Suyderhoud

    (Eastern Michigan University)

  • Michael Veseth

    (University of Puget Sound)

Abstract

This paper defines the relationship between the nominal (or money) income elasticity and the real income elasticity of a tax system. Under most circumstances, the real and the nominal income elasticities differ. This difference has not been recognized by economists who rely strictly on nominal elasticities as an indicator of revenue adequacy or tax burden, a practice which can be misleading, especially under conditions of general price inflation. The income tax, sales tax and property tax are analyzed briefly in terms of their elasticity features.

Suggested Citation

  • Jack P. Suyderhoud & Michael Veseth, 1976. "The Effect of Inflation on the Income Elasticity of Taxes," Public Finance Review, , vol. 4(3), pages 323-337, July.
    • Handle: RePEc:sae:pubfin:v:4:y:1976:i:3:p:323-337
    DOI: 10.1177/109114217600400305
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    References listed on IDEAS

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    1. Ernest Kurnow, 1963. "On The Elasticity Of The Real Property Tax," Journal of Finance, American Finance Association, vol. 18(1), pages 56-58, March.
    2. Dick Netzer, 1961. "Financial Needs and Resources over the Next Decade: State and Local Governments," NBER Chapters, in: Public Finances: Needs, Sources, and Utilization, pages 23-78, National Bureau of Economic Research, Inc.
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