ABSTRACTInflation may be looked upon as a deferred consumption tax which reduces consumer purchasing power through high prices to compensate for earlier excess expansions of credit. A portion of this excess borrowing is by government to finance deficits. The inflation cost may then be compared by family–income class with the alternative income taxes needed to avoid inflation by eliminating the deficits. By this calculation for 1965–75, the inflation cost was highly regressive, with an effective rate of 17 percent on. families below $5,000, and 17 times greater than such families would have had to pay in income taxes. Meantime, the effective inflationary tax rate for wealthy families over $50,000 in income was a bonus, or tax rebate, of one perc