Abstract
P oROPOSALS for new or increased social security taxes' have recently been advanced on the ground, among others, that such taxes would constitute an effective brake on inflation. It is the purpose of this paper to investigate the validity of this claim. Pigou's criterion for the existence of inflation is that money income is expanding more than in proportion to income-earning activity. 12 Modern war, at least in the belligerent countries, and except in its early stages, is typically a time of maximum incomeearning activity.3 Once the war effort is in full swing, there is no unemployment except for the unavoidable minimum incident to the transfer of resources from civilian to war production and similar frictional causes. Conceivably the tax load may be so heavy as to reduce employment below this maximum,4 but the likelihood of such an eventuality seems so small as to justify its being ignored. If employment of resources is at a maximum and the amount
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