Capital Income Taxes and the Benefit of Price Stability

  title={Capital Income Taxes and the Benefit of Price Stability},
  author={Martin S. Feldstein},
Going from low inflation to price stability involves a short term loss (associated with the" higher unemployment rate required to reduce the inflation) and results in a series of welfare gains" in all future years. The primary source of these gains is the reduction in the distortions that result" from the interaction of tax rules and inflation. The paper quantifies the gains associated with" reducing the distortion in favor of current consumption rather than future consumption and in" favor of… 
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