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Thu Nov 4, 2021, 05:18 PM

The inflation tax is not only real, it's massive

"If you are under the impression that the “inflation tax” is only an allusion to the shrinking impact inflation has on the purchasing power of your income and savings, you should continue reading.

Inflation is a real tax, just as real and at times nearly as important as the individual income tax. While inflation clearly does reduce the purchasing power of your earnings and fixed-income asset values, it also redistributes purchasing power from businesses and households to the federal government. And in today’s economy, with inflation running at 5.4 percent, the inflation tax is no small matter. The amount the government will collect from the inflation tax in 2021 exceeds $1.9 trillion.

Most people understand that inflation can redistribute income and wealth. For example, many probably are aware that unanticipated inflation benefits borrowers at the expense of creditors. When inflation is higher than expected, borrowers repay debt with future dollars that have less purchasing power."



[link:https://thehill.com/opinion/finance/580043-the-inflation-tax-is-not-only-real-its-massive|

11 replies, 1177 views

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Response to MichMan (Original post)

Thu Nov 4, 2021, 05:22 PM

1. But inflation isn't real and we should just ignore it and shop local

I read that here

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Response to AZSkiffyGeek (Reply #1)

Thu Nov 4, 2021, 05:55 PM

6. It's very real and

 

getting realer (yep that’s a word and I’m sticking to it)

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Response to MichMan (Original post)

Thu Nov 4, 2021, 05:26 PM

2. So the tax code should be changed for people making less than a certain amount.

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Response to marie999 (Reply #2)

Thu Nov 4, 2021, 05:54 PM

5. other than one throwaway sentence, he's not talking about the tax code or any actual tax.

he's tacking the word "tax" on to inflation to make it sound like something it isn't, and to make it sound like biden is responsible for it.

all he's technically saying is that the government is a big borrower and inflation means it's easier to pay down its debt with inflated dollars. therefore inflation amounts to an increase in effective wealth for the government, and a corresponding decrease in effective wealth for the people who hold treasury debt.

calling that a "tax" is misleading. it's just one of many effects of inflation.

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Response to MichMan (Original post)

Thu Nov 4, 2021, 05:32 PM

3. What a ridiculous notion.

Being pushed by a newspaper that wants to feed the notion that "Biden increased your taxes because there was inflation".

You saw that 2022 Republican talking point here first.

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Response to TheRealNorth (Reply #3)

Thu Nov 4, 2021, 06:34 PM

8. Nobody is going to need an explanation on inflation

Going to the grocery store explains it quite clearly.

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Response to TheRealNorth (Reply #3)

Thu Nov 4, 2021, 08:12 PM

11. No, I saw that 2022 (R) talking point for the first time in the mid 1970s.

Now, it does reduce the value of debt.

If my income keeps up with inflation then my mortgage is worth less in future "real" dollars. As is Federal debt.

Assets usually appreciate. So if you own a house, it increases in value, cet. par.

It also decreases the worth of many liquid investments. My pension isn't pegged to inflation. My mother's estate was put into self-serving investments by the court-appointed fiduciary with minimal interest. Right now, with interest near zero in demand deposits, the money I have in the most liquid form to get me through emergencies--leaky roof, broken fridge, dead car--has lost 5% over the last year.

In other words, my pension is worth 5% less year over year (I'm not retired, and this might mean "work another year past 67 for the same benefits", my mother's estate is worth 5% less, my savings (which actually were drawn down for an emergency, but are still a few thousand) are worth less.

I figure that between estate and pension I'm down close to the median wage in the US. If it keeps up being "transitory" then I might wind up working until I die.

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Response to MichMan (Original post)

Thu Nov 4, 2021, 05:52 PM

4. Wow, a very complicated explanation of this inflation tax...before I make a judgment on Thehill's

article, I'm going out to an reputable economics site, and investigate how they view inflation tax, etc. without any bias.

I guess the main point I'm making is that Thehill has a very slanted view/one sided view, skewed towards repug viewpoints (their supposed business favorable viewpoints in another words)...I think perhaps its an example of throwing too much verbiage out there to confuse perhaps? I do have a couple of econ. degrees (minor and major) and their write up wore me out ... I'll look at later perhaps I get more energy.

Thus, more site digging in store on some reputable talking point sites on the inflation tax...

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Response to SWBTATTReg (Reply #4)

Thu Nov 4, 2021, 06:02 PM

7. According the Media Bias chart it looks like they are ranked in the middle and considered factual

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Response to MichMan (Original post)

Thu Nov 4, 2021, 06:40 PM

9. "All paper money eventually returns to its intrinsic value...zero".

-Voltaire.

Since 1965, the US dollar has lost nearly 90 percent of its value.

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Response to MichMan (Original post)

Thu Nov 4, 2021, 06:43 PM

10. this is a misleading argument

Let me point out of few things here, we are the government, the government is us. We the people are paying more for stuff. The government is also paying more for stuff. We are paying off debt with inflated dollars, the government is paying off debt with inflated dollars. It's not a zero sum game where the supposed government (that is not us) is somehow making out better at our expense.

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