Does taxing the wealthy lower inflation?

Too much demand relative to supply and too much money in the system can cause inflation. One classic way to reduce both is to tax. Taxes take money out of the system, which means there is less money going after goods, lowering demand. However, taxing lower and middle class people who are already dealing with rising prices can be a real burden. It would be less of a burden for the wealthy who have plenty of money for both necessities and luxuries. However, is taxing the wealthy effective for fighting inflation?

Taxing the wealthy can help fight inflation, but its effectiveness is limited for two reasons. One, compared to taxing everyone, it doesn’t take as much money out of the system. And two, the lower and middle classes are more likely to reduce spending as a direct result of higher taxes, while the wealthy are relatively more likely to reduce investments. Because the wealthy have such ample money, they can lose a fair amount of it and maintain their spending if they are willing to lower their rate of investment. This means compared to lower classes, more of the wealthy won’t reduce their spending and therefore taxes on them will have relatively less effect on inflation. That said, some of them will reduce spending as a result of taxes, so taxing the wealthy does help fight inflation somewhat.

When the wealthy spend less, that is less demand on those goods, and less business for the businesses producing those goods, and less pay for workers of those businesses. Those businesses and workers then spend less…