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.
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