Why does inflation increase your tax burden, at least in the short run? I. Inflation bloats stock prices, which leads to a capital gains tax burden. II. The market value of financial assets rises with inflation and the U.S. tax system assesses taxes on such gains, even if the "real" value of such assets remains the same. III. Consumers pay higher sales taxes when the prices of goods and services increase due to inflation.
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Inflation can increase your tax burden because it can lead to higher capital gains taxes as stock prices rise (I), taxes on nominal gains in financial assets even if their real value hasn't increased (II), and higher sales taxes as the prices of goods and services increase (III).

Why Does Inflation Increase Your Tax Burden, at Least in the Short