ABSTRACT
Many proposals have been made for the design of tax/subsidy arrangements to provide an incentive to refrain from raising money prices or money costs. There is a great range of possibilities. In this chapter we will examine two examples of such schemes. Our purpose is to enquire whether they are likely to act as efficient instruments in reducing the rate of price inflation and thus to be welcomed as supplements to, or even complete substitutes for, the other proposals discussed in Chapters VI, VII, VIII and IX. Some tax schemes may, of course, lead to unemployment by reducing the total level of spending power and so the demand for goods and services or by raising costs of production in any given conditions of total money expenditures on goods and services. Since the whole purpose of this work is to consider ways of combining full employment with reasonable price stability we will throughout this chapter neglect any possibility of tax/subsidy schemes restraining wage-cost inflation by the creation of unemployment; we will consider their effects upon (1) wage-fixing and (2) profit mark-ups in conditions of full employment and will assess their usefulness as anti-inflation devices in conditions of full employment.
