The Review of Economics and Statistics Vol. 34 No. 3 1952
Note on Inflationary Consequences of High Taxation
Abstract
TN their critical analysis of the evidence advanced by Colin Clark for his conclusion that taxation exceeding approximately 25 per cent of national income is inflationary, Messrs. Pechman and Mayer have successfully accomplished a much needed task. The concept of the 25 per cent limit was presented in both the Economic Journal and Harper's in an unqualified manner. It is little wonder that it has been incorporated into popular discussion on tax and budget policy as a new dogma. As is so often true, the assertion of an oversimplified proposition obscures the need for discriminating judgments in the formulation of alternative policies. The purpose of this note is to suggest some of the limitations and distinctions which should be recognized in applying the idea that taxation may be inflationary in policy determination. Three general propositions are stated below; on them there may be fairly general agreement. These are followed by brief comments on the current situation in the United States; on these there will inevitably be considerable disagreement. The latter opinions are expressed in a terse form, without full elaboration or listing of assumptions, to illustrate the extensive coverage, though not the thoroughness, of the analysis appropriate in the formulation of policy.
- DOI
- 10.2307/1925630
- Volume
- 34
- Issue
- 3
- Pages
- 243
- Sources
- openalex crossref