The Effect of Inflation on the Income Elasticity of Taxes
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.
THE RESPONSIVENESS OF STATE TAX REVENUE TO ECONOMIC GROWTH: A REPLY
WE for WOULD pointing out like the to error thank contained Mr. Liu for pointing out the error contain d in footnote 5 of our paper. In making that statement, we had anticipated our more general model in which we assume perfectly elastic supply and thus, of course, zero rate elasticity implies a zero price elasticity of demand. Mr. Liu has engaged in an arithmetic "overkill" in his argument. In the case in which supply is other than perfectly elastic, the rate elasticity of consumption expenditures is zero only if either the price elasticity of demand or supply is zero. Either condition is questionable. In part II (On the "General Theory") of his comment, Mr. Liu asserts that our identity C = Cu + Ct (1 + r2) depends upon the implicit assumption ". . . that consumers bear the entire burden of sales
THE DECLINE OF THE GENERAL PROPERTY TAX
The recent history of the general property tax is unique in that this is the only important tax in the United States that has not increased markedly in yield during the past twenty-five years. In fact, property tax revenues declined during the early thirties and only in 1947 did total levies exceed those of 1930. At the same time complaints of excessive property levies continue; and municipalities are feverishly searching for new sources of revenue both to " relieve real estate " and to meet threatened deficits.