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Inflation for idle assets
Inflation as a disincentive
Cash under a mattress for 10 years at 2% inflation loses 18% of its purchasing power. That is a pretty good disincentive to hoard it, and it pushes people to invest their cash and put it to productive use in the economy.
Taxes as incentives
The argument is for a matching tool for unproductive assets, built on taxes meant as incentives rather than as a way to fill budget gaps. In economics, you get more of what you subsidize and less of what you tax. If an asset generates ongoing value, a small wealth tax is a cost of doing business. If its value depends on selling it later at a higher price, the tax becomes a problem, and that is the intended effect. Capital tied up in an asset that costs money instead of making it gives its owner a reason to invest it productively.
Wealth tax politics
Wealth taxes are controversial. California has ongoing efforts, and France repealed its solidarity tax on wealth, replacing it with a more targeted wealth tax on property. A patchwork of national and state policies enables billionaire flight from places with wealth taxes.
Why do central banks target 2% inflation?
New Zealand adopted the world's first formal inflation target in 1990, and many central banks followed. A positive target gives a central bank room to cut interest rates in a downturn before they reach zero. Mild inflation also keeps the economy further from outright falling prices, which can be hard to escape. The Federal Reserve announced an explicit 2 percent goal in January 2012.
Has anyone ever taxed cash itself?
In 1932 the Austrian town of Wörgl issued local scrip that lost 1 percent of its value each month unless the holder bought a stamp to keep it valid. The idea came from Silvio Gesell, a German merchant, and economist Irving Fisher later promoted stamp scrip. Notes issued this way were meant to be spent rather than held. The Austrian National Bank shut the Wörgl experiment down in 1933.
Do negative interest rates work like a tax on cash?
Negative rates charge banks for holding reserves at the central bank, which works like a small tax on idle balances. Sweden's Riksbank first set a negative policy rate in 2009, and Denmark's central bank followed in 2012. The European Central Bank set a negative deposit rate in June 2014, becoming the first major central bank to do so. Banks generally avoided passing the charge on to ordinary depositors.
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