Inflation is a Tax: Hits the Poor Worst

wheelbarrow-of-money-400Last week I talked about the misdirection used in promoting the Estate tax, or Death tax. Warren Buffett tells us that it will level the playing field for us normal folks to compete with billionaires like him and Paris Hilton, who the tax would effect. The only problem is that the tax starts taking 55% of inheritance after a million dollars–hardly only effecting billionaires. As a result small farms and businesses all over the country will not survive the death of their owner, as without liquid assets to pay 55% of the inheritance to the government, assets and land will need to be sold off in order to ante up to Uncle Sam.

Thomas Sowell recently wrote an article describing another widespread concealed truth: inflation is a tax. Everything that the Federal Reserve and Treasury Department are doing to get us out of economic trouble amounts to printing money (they call it quantitative easing). When money is printed, it adds to the total amount of dollars available to purchase things, while the number of things available to be purchased remains the same. This is inflation, the value of a dollar decreasing. When money is printed, it weakens the purchasing power of that currency.

But where does the value of that money go? Into the newly printed money. Who gets to spend this new money? The government. Therefore inflation takes value from the savings of Americas, and gives it to the government. That is why inflation is a tax, they get to spend newly printed money, the value of which is derived from the savings accounts of American citizens. The purchasing power of everyone’s dollar is now less, and the government gets to use the excess. If you have $100 in a bank account, and inflation goes up 4% this year, that means it will now cost you $104 to buy something that a year earlier would have cost $100. The other 4 bucks worth of purchasing power went to the government to spend as newly minted bills.

How does this tax effect poor people harder than the rich? Mostly because the rich can convert their cash into other things which do not lose value as easily, such as land and gold, the values of which rise with inflation. Poor people cannot generally convert as much of their cash, meaning it must be stored in a savings account, or in a jar, or under a mattress. Anywhere the money is put, if it remains cash, it will not escape the tax on saving that is inflation.

If you put $1,000 in your piggy bank in 1960 and took it out to spend in 2000, you would discover that your money had, over time, lost 80 percent of its value.

Despite all the political rhetoric today about how nobody’s taxes will be raised, except for “the rich,” inflation transfers a percentage of everybody’s wealth to a government that expands the money supply. Moreover, inflation takes the same percentage from the poorest person in the country as it does from the richest.

That’s not all. Income taxes only transfer money from your current income to the government, but it does not touch whatever money you may have saved over the years. With inflation, the government takes the same cut out of both.

All this has happened and is happening with normal inflation, which is bad enough. It is quite possible that the American economy could see hyperinflation when a vast amount of money enters circulation. In the 1920’s in Germany thousands of printing presses ran full blast so that the government could pay for whatever it wanted. As a result, prices skyrocketed, and people’s life savings was used to buy a loaf of bread. As is the case in America right now, there were plenty of politicians who knew how to solve all the nation’s problems, so their rhetoric would suggest.

A rising demagogue coined the phrase “starving billionaires,” because even a billion Deutschmarks was not enough to feed your family. That demagogue was Adolf Hitler, and the public’s loss of faith in their irresponsible government may well have contributed toward his Nazi movement’s growth.

Americans are leaving themselves completely vulnerable to be robbed of their savings, cash, and retirement if we do not get our government under control. We cannot continue to allow the printing of vast amounts of money, which amounts to a back door tax on every savings account and wallet in America. If this situation continues, we will find ourselves in economic turmoil, unable to buy the smallest amount of necessities with what would have once bought a months’ groceries. We cannot allow ourselves to remain vulnerable to the forces which swept Adolf Hitler, and countless other destructive demagogues into power throughout history. As Americans we must take control of our future, and refuse to have economic calamity dictated by the planners of our economy in Washington.

4 thoughts on “Inflation is a Tax: Hits the Poor Worst

  1. Pingback: “The Recovery”: Real Wages Fall, Black Unemployment Up | Vigilant Vote

  2. Pingback: The Declaration of Independence | Joe Jarvis

  3. Pingback: Would the Fall of the United States Government be as Tumultuous as the Fall of Rome? | Joe Jarvis

  4. Pingback: 5 Solutions for Combating Terrible Government | Joe Jarvis

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