Milton Friedman: Inflation Taxation
on Thursday, December 10, 2020Milton Friedman Money Quote saying inflation is the only government gain without needing to legislate it. Milton Friedman said:
“Inflation is taxation without legislation” — Milton Friedman
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Milton Friedman is suggesting that inflation has the effect of functioning as a hidden or indirect tax. When inflation raises prices overall in an economy, the value of money held by individuals and businesses decreases over time.
Even though taxes have not been raised through the legislative process, people experience higher costs of living and the real value of their money being taxed away through inflation.
So Friedman’s point is that inflation erodes purchasing power and acts as a tax on the value of money in one’s possession, even if it was not approved through the traditional tax legislation process.
In this view, inflation transfers wealth from citizens to the government in a way that is hard to see but still burdens people financially.