Taxing the Poor (Sowell on inflation)

Creators Syndicate ^ | December 11, 2012 | Thomas Sowell

[jazusamo]

With all the talk about taxing the rich, we hear very little talk about taxing the poor. Yet the marginal tax rate on someone living in poverty can sometimes be higher than the marginal tax rate on millionaires.

While it is true that nearly half the households in the country pay no income tax at all, the apparently simple word "tax" has many complications that can be a challenge for even professional economists to untangle.

If you define a tax as only those things that the government chooses to call a tax, you get a radically different picture from what you get when you say, "If it looks like a tax, acts like a tax and takes away your resources like a tax, then it's a tax."

One of the biggest, and one of the oldest, taxes in this latter sense is inflation. Governments have stolen their people's resources this way, not just for centuries, but for thousands of years.

Hyperinflation can take virtually your entire life's savings, without the government having to bother raising the official tax rate at all. The Weimar Republic in Germany in the 1920s had thousands of printing presses turning out vast amounts of money, which the government could then spend to pay for whatever it wanted to pay for.

Of course, prices skyrocketed with vastly more money in circulation. Many people's life savings would not buy a loaf of bread. For all practical purposes, they had been robbed, big time.

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.

[Crucial]

Of course, prices skyrocketed with vastly more money in circulation. Many people's life savings would not buy a loaf of bread. For all practical purposes, they had been robbed, big time.

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.

We should learn from history. This robbery is happening now. Whether Obama becomes Hitler, I don't know but we're headed toward an inflation calamity. If I were rich, I would invest in things that would be harder to get like basic necessities and also things that would make me more productive in gaining basic necessities that perhaps could save me money in the short term as well.

[TheOldLady]

Thank you for the ping.

So, the government is successfully raising taxes on absolutely everyone.

All I know is that my grocery bill doubled in the last couple of years, and our diets are pretty stable. We eat about the same things in rotation every week or two. We haven’t bought any big ticket items or extras. Just for the usual, it has doubled.

[BwanaNdege]

My Mom bought a 1100 sq.ft. 3 BR 1 bath on a slab, with a carport, for about $7800, in 1964.

When I started at Ga Tech in ‘65, they said that upon graduation we would probably be earning $10,000-$12,000.

IIRC, a 289 Cobra was $4,995, an XK-E was about $6,300 and a 911 was $6,995. Those days are long past.

[BfloGuy]

Sowell could have chosen a much better example than someone whose income wasn't earned by her/him.

He chose that example because that's the type of person the Democrats claim to help.

[4Liberty]

thanks for posting!

[from occupied ga]

Who is going to feed the starving millions when the EBT system crashes and burns with the dollar?

When the government inflates away all of the saved wealth, taxes retirement plans, makes sure that those who have money can't use it to buy health care, when the economy is ruined, and the saved private wealth is confiscated by the government to subsidize it's beloved parasites, then as you say the reset will be very harsh

...Now we pay the stupidest among us more per low-IQ baby.

But they're smart enough to steal, but mostly too lazy to do so.

Going by 20th century history, the government's standing army will uphold the tyrants to the very end. as you sayit will be harsh indeed

[redhead]

"Also tax on fixed income and min wage earners As they can’t keep up with increasing costs of food & other living expenses"

After over 4 years, I finally got a "COLA" increase in my SS payment, which amounted to a shriveled pittance of less than a hundred dollars. At the same time, my "premium" for medicare went up over ten dollars, and the amount withheld for my taxes also increased. After doing all the figuring and juggling, my total deposit increased by about $9. This, in spite of the fact that prices on everything I must purchase have increased by 30% or so in the last couple of years. It's a good thing I don't drive or own a car. I shudder to think of what my situation would be like in that case.

[oldbrowser]

This is the money quote:

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.

The point is the government is robbing everybody, but most especially our accumulated savings which have already been taxed. They are forcing every last dime out of your pocket to the lift the economy. The same economy that they are simultaneously strangling with anti free market policies.